What is equity?

Any company needs capital.It can be both own and borrowed.In any case, the sources of raising funds are limited.Equity capital of the company - it is monetary valuation of all property belonging to him.It includes the share, plus its kinds, all kinds of donations, contributions and income from direct economic activity, and other elements.However, the main source through which replenishes equity is the profit.Equity That it is the basis of formation of such important assets of the enterprise, as a consumer, storage and backup.In the event that the economic activity is retained earnings, it is sent to the subsequent turnover or to issue additional securities - shares.

advantages that equity businesses

Firstly, it is characterized by a very simple procedure for recruitment.In other words, the management company does not need to agree on a decision to increase the equity capital from other entities, organizations, institutions.Secondly, when you use it do not need to pay interest on loans.Third, equity cap

ital provides the financial stability of the organization and thus significantly reduces the risk of bankruptcy.

few words about the shortcomings

Equity turnover First of all, this limited increase in this indicator, with the result that there are some within the expanded both operational and investment activities.In addition, this type of capital is expensive when compared to its borrowings.Besides the high level of this index makes it impossible to gain profit ratio due to outsourcing.

Analysis equity

It is for the reasons mentioned above, you need a sound approach to the use of different types of financial resources.For these purposes it is necessary to analyze different parameters.This procedure allows to evaluate current and potential financial condition of an economic entity, and offer reasonable options for the development of the enterprise, in accordance with the means at its disposal sources of funding.Analysis of equity analysis can be conducted using a variety of economic models.Each of them allows us to trace and identify the structure of the relationship between the main indicators of the financial condition of the organization.In the study of equity adopted special attention is paid to the fixed assets.We study their current state, dynamics and structure.Equally important is an indicator such as the turnover of equity.It is calculated in revolutions.It represents the ratio of the volume of sales to the value of equity, the average annual value is taken.This figure shows the excess (deficiency) of sales, the rate of turnover of invested capital, as well as the activity of the movement of money.Too high a value entails excessive borrowing, and low indicates the irrational use of the main.