Talk:Shareholders' equity
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If the calculation is : retained earnings from the prior year + net income of the year at hand (revenues - expenses) - dividends paid during the year at hand , What about the use of the earnings by the compnay to fund a future investment or expansion ?? Isn't that a withdrawl from the earnings and therefore it reduces the shareholder's equity like: retained earnings from the prior year + net income of the year at hand (revenues - expenses) - dividends paid during the year at hand - Withdrawls by the company ?? Is that right ?
Answer. You are confusing cash flows with revenues/expenses. Paying money (asset='cash' decreases) to build a long-term plant (asset='fixed asset' increases) just changes two items on the Balance Sheet. There is no effect on the Equity. The 'equation' that was given is wrong. I have corrected it.Retail Investor 02:36, 14 October 2006 (UTC)
