Share Capital

AAA

DEFINITION of 'Share Capital'

Funds raised by issuing shares in return for cash or other considerations. The amount of share capital a company has can change over time because each time a business sells new shares to the public in exchange for cash, the amount of share capital will increase. Share capital can be composed of both common and preferred shares.

Also known as "equity financing".

INVESTOPEDIA EXPLAINS 'Share Capital'

The amount of share capital a company reports on its balance sheet only accounts for the initial amount for which the original shareholders purchased the shares from the issuing company. Any price differences arising from price appreciation/depreciation as a result of transactions in the secondary market are not included.

For example, suppose ABC Inc. raised $2 billion from its initial public offering. Over the next year, the total value of its shares increases to $5 billion. In this case, the value of the share capital is still only $2 billion because ABC Inc. had received only $2 billion from the sale of its securities to the investing public.

RELATED TERMS
  1. Shareholder

    Any person, company or other institution that owns at least one ...
  2. Authorized Share Capital

    The number of stock units that a publicly traded company can ...
  3. Shareholders' Equity

    A firm's total assets minus its total liabilities. Equivalently, ...
  4. Shares

    A unit of ownership interest in a corporation or financial asset. ...
  5. Additional Paid In Capital

    A value that is often included in the contributed surplus account ...
  6. Capital Reduction

    The process of decreasing a company's shareholder equity through ...
Related Articles
  1. Stock Basics Tutorial
    Investing Basics

    Stock Basics Tutorial

  2. Getting The Real Earnings
    Options & Futures

    Getting The Real Earnings

  3. What do people mean when they say debt ...
    Investing

    What do people mean when they say debt ...

  4. What You Need To Know About Preferred ...
    Trading Strategies

    What You Need To Know About Preferred ...

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center