Simple formula for calculating the capital contribution percentage - Kounselly
calculating the capital contribution percentage

Simple formula for calculating the capital contribution percentage

Capital is an indispensable element in the financial and investment plan of any business or project. The capital contribution percentage is an important indicator that helps determine the level of contribution of each stakeholder in the capital mobilization process. Let’s learn with Kounselly how to calculate simple capital shares through the following article.

How to calculate capital shares in a Joint Stock company

How to calculate capital contributions in a joint stock company is an important issue that investors need to understand when participating in the business activities of the enterprise. Capital shares are the amount of money that shareholders contribute to the company to carry out business projects, develop products, expand markets and improve competitiveness.

Capital contributions are also the basis for determining the rights and obligations of shareholders in the company, including the right to enjoy profits, the right to participate in management, the right to preemtively buy shares that are newly released. To calculate the capital shares of a shareholder in a joint stock company, the following formula can be used:

Shareholders’ capital contributions = Number of shares owned x Par value of each share

The par value of each share is the amount specified on the share certificate, usually 10,000 VND or 100,000 VND. The number of shares owned is the number of shares that a shareholder has purchased from the company or from other shareholders.

For example: A joint stock company has 1,000,000 shares with a par value of 10,000 VND. A shareholder A owns 100,000 shares. So, shareholder A’s capital contribution is:

100,000 x 10,000 = 1,000,000,000 VND.

This method of calculating share ownership ratio only applies to joint stock companies whose par value of shares does not change over time. For joint stock companies whose market value of shares fluctuates according to demand and supply on the stock market, the following formula to calculate the capital contribution percentage can be used:

Shareholders’ capital contributions = Number of shares owned x Market value of each share

The market value of each share is the selling or buying price of each share on the stock market at the time of consideration.

For example: A joint stock company has 1,000,000 shares with a par value of 10,000 VND. A shareholder B owns 100,000 shares. At the time of consideration, the market value of each share is 15,000 VND. So, the capital shares of shareholder B are:

100,000 x 15,000 = 1,500,000,000 VND.

This calculation indicates the current value of capital contributions, but can also change according to stock market fluctuations. Therefore, shareholders need to monitor and analyze their capital contributions regularly and scientifically to make reasonable and optimal investment decisions.

See more: Shareholders’ equity: Determine business value and investment potential

How does a joint stock company divide profits?

A joint stock company is a popular form of business in which charter capital is divided into parts called shares. Shareholders are those who own shares of the company and have the right to participate in management, decide policies and enjoy the company’s profits.

The profit of a joint stock company is calculated as total income minus expenses, taxes and other deductions. Profit after tax is called net profit and is divided among shareholders according to the proportion of shares they own.

There are two ways to divide shares in a company: dividends and surplus. Dividends are the payment of cash or shares to shareholders each year, based on the decisions of the board of directors and the shareholders’ meeting. A surplus distribution is the payment of cash or assets to shareholders when a company dissolves, liquidates, or merges.

Contributing business capital and sharing profits with shareholders has the effect of encouraging investors to participate in the company, increasing the value of shares and creating reputation for the company in the market.

Forms of dividend distribution in Joint Stock companies

Dividends are a portion of a company’s profits distributed to shareholders according to their ownership ratio. There are two common forms of dividends: cash dividends and stock dividends.

Cash dividends are a form of cash dividends distributed to shareholders. Cash dividends have the advantage of increasing liquidity for investors, demonstrating the stability and transparency of the company, and encouraging investors to hold shares for the long term.

Stock dividends are a form of dividend payment by issuing additional shares to existing shareholders. Stock dividends have the advantage of not reducing the company’s capital, not creating tax costs for shareholders, and can increase investors’ interest and confidence in the company.

In addition to the simple formula for calculating capital contribution percentage, there are also a number of other more complex formulas, suitable for special cases. However, the simple formula for calculating capital contribution percentage is the most basic and common formula and can be used in many cases.

See more: 6 business valuation methods


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