Tag: equity

What is current & long term Debt?

Current & Long Term Debt Current portion of long term debt: amount payable in the next financial year (following 12 months) Long term debt = Total debt – current portion per (1) Business must in a position to settle the current portion of the debt

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What is Debt=Equity Ratio?

Debt-Equity Ratio Ratio: Total Debt / Total Equity = % The higher the debt-equity ratio, the higher the risk of the business Ratio rises/falls if debt is increased /decreased or equity decreased/increased

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What are Drawings?

Drawings The owner can draw / withdraw / take out cash and assets from the business The bank (cash) balance or the asset (e.g. vehicle) is reduced by drawings Owner’s Equity is reduced by drawings

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What is Sweat Equity?

Sweat Equity, is where the entrepreneur  Contributes time & effort, your “sweat” Contributes knowledge, skills & connections

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What is Owner’s Equity?

Owner’s Equity Owner’s Equity = Capital Contribution + Changes below Owner’s Equity Computation Capital contribution by the owner + Net Profit – Net Loss – Owner Drawings = Owner’s Equity

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