Business Financial Information Secrets

CHAPTER 17Deciphering the Cap Table

CRITICAL KNOWLEDGE TO HELP MAINTAIN CONTROL OF YOUR BUSINESS

Here we are, at the end of the book. Fittingly, we have elected to hold our final discussion to the last section of the balance sheet – owner's or stockholders' equity. This is the section of the balance sheet that appears on the bottom of the right‐hand side of the balance sheet (from a horizontal perspective) or at the bottom of the second page (from a vertical perspective). It is no coincidence that we have saved this topic for the end of the book as, after all is said and done with learning the whats, whens, wheres, and hows of financial information, we turn our attention to who owns and controls a business (and why this is so critical, beyond the obvious reasons).

Before we dive into explaining owners' equity in more depth, we would like to preface our discussion by highlighting two points:

1. For those readers who are operating a business unit or division of an existing business, our discussion on owners' equity and business capitalization may not appear to be all that relevant (why bother? The corporate mother ship deals with the function of raising capital and managing the owners and creditors). Simple enough, but we should note that the topics covered in this chapter could be useful for you to understand beyond just how your organization is capitalized. It is important to clearly understand that whether it be working with customers, suppliers, strategic partners, or the like, ...