CHAPTER 8OWNERSHIP AND EQUITY

MAKE A KILLING IN EQUITY?

Fortunes are made by many who build up equity in a business. They leave most of the net income in the business, so assets increase faster than liabilities; and that means the equity, and probably the market value of the equity, increases. Fortunes are also made by those who buy and sell the ownership (equity) interests in business.

Because ownership of a business ranks right up there with income in order of importance of financial figures, and because this equity is the conduit that ties income statements and balance sheets together, we’ll look at it in more detail in this chapter.

The Spouse House Company balance sheet has grown to be somewhat complex, so to illustrate some basic concepts ...

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