Question

How to calculate external equities?

Answer 1

Answer:

Step 1

Divide the dividends that you receive from a company by the company's net income. For example, if the company that has made a net profit of $20,000 pays you $100 in dividends after you invested $5,000, divide $100 by $20,000 to get 0.005.

Step 2

Divide the equity that you contributed to the company by this ratio. With this example, divide $5,000 by 0.0005 to get $1 million in total equity.

Step 3

Subtract the company's current total equity from its target equity level. For example, if the company seeks $1.1 million in equity, subtract $1 million from $1.1 million to get $100,000. This is the amount of external equity that the company need

Explanation: