Owners’ Equity Paper
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Title: Owners’ Equity Paper

Essay Details:

Subject: Business
Author: Alice S
Date: July 23, 2016
Level: University
Grade: A
Length: 2 / 429

Essay text:

Earned capital is the amount of money that is generated by the profitable operations of the company. (Investorwords, n.d.) It is important to keep paid-in capital separate from earned capital because paid-in capital is not a true reflection of a company’s performance. Net income is the source of earned capital. If the two types of capital were not kept separate, the net income would be overstated and show that the company is more profitable than it really is. As an investor, is paid-in capital or earned capital more important? As an investor, earned capital is more important when attempting to figure out how profitable the company is because paid-in capital is money that has been exchanged for stock; this amount has nothing to do with how profitable the company’s operations are...

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