Podcast
Questions and Answers
Which of the following is a common reason for a company to issue shares?
Which of the following is a common reason for a company to issue shares?
What effect does issuing shares have on the ownership of existing shareholders?
What effect does issuing shares have on the ownership of existing shareholders?
How does issuing shares impact the financial position of a company?
How does issuing shares impact the financial position of a company?
What is the formula for calculating the gaining/sacrificing ratio in the admission of a new partner?
What is the formula for calculating the gaining/sacrificing ratio in the admission of a new partner?
Signup and view all the answers
What does a high gaining ratio indicate in the context of admitting a new partner?
What does a high gaining ratio indicate in the context of admitting a new partner?
Signup and view all the answers
How does the sacrificing ratio relate to the gaining ratio in the admission of a new partner?
How does the sacrificing ratio relate to the gaining ratio in the admission of a new partner?
Signup and view all the answers
Study Notes
Issuing Shares
- A common reason for a company to issue shares is to raise capital for business expansion or to pay off debts.
Effect on Ownership of Existing Shareholders
- Issuing shares can dilute the ownership of existing shareholders, as the new shares issued reduce their proportion of ownership in the company.
Impact on Financial Position
- Issuing shares can improve the financial position of a company by increasing its capital base and reducing its dependence on debt.
Admission of a New Partner
Calculating Gaining/Sacrificing Ratio
- The formula for calculating the gaining/sacrificing ratio is: Gaining Ratio = (Sacrificing Partner's Sacrifice / New Partner's Capital Contribution) × 100
Gaining Ratio Indication
- A high gaining ratio indicates that the new partner is gaining a larger share of the business at the expense of the existing partner(s).
Sacrificing Ratio and Gaining Ratio
- The sacrificing ratio is the reciprocal of the gaining ratio, and it represents the proportion of the business that the existing partner(s) sacrifice in favor of the new partner.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge on why companies issue shares, the impact on existing shareholders' ownership, and the effect on a company's financial position.
