Completing the Balance Sheet Student Handout Contents: 1. Learning Objectives 2. Tutorial Questions 3. Lecture Materials Lecturer: Dry Victoria Clout Website: http://tell. Nuns. Du. AU Introduction and Learning Objectives In this week we are turning our attention towards the remaining major component of the balance sheet – owners’ equity. Like liabilities, owners’ equity represents another form of financing for a business.

At first glance, liabilities (capital provided by redirectors) and owners’ equity (capital provided by owners or shareholders) may look very different. As we delve deeper into the topic, however, you will appreciate that debt and equity are at either end of a continuum of financial instruments and that sometimes, financial instruments exhibit both debt- and equity-like qualities. Further, you will note that some financing arrangements do not appear in the balance sheet at all!

In our discussion of equity financing, we discuss the option of using equity as a source for resources (assets) of the corporation. Shareholders are a key source of initial finance for a company. While traditionally regarded as the owners of a company’s assets, more recent thought suggests that the shareholder exchanges their investment in a company for a right to the residual cash flows of the firm (dividends). At the end of this topic, you should be able to: LOL . Describe the components of owners’ equity ALL.

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