Additional Paid in Capital
What does it mean
Equity on a balance sheet can typically be broken down into three types (Common Stock, Additional Paid in Capital & Retained Earnings), and these types differ based on the original source of those funds being added into the business. Additional Paid in Capital represents the accumulated total of all additional capital injected into a business by owners since initial inception of the business.
Why does it matter
The different types of equity allows a banker to quickly identify how the equity in a business was created. Knowing that the equity in the business was built via successfully operating a profitable business (high amount in retained earnings) versus just having investors kick in a bunch of money at the inception of the business (high amount in Common Stock) is important.
Other Relevant Terms
Want to Master Banking's Favorite Ratio?
The Debt Service Coverage Ratio (DSCR) is one of banking's favorite ratios. Want to ace it without breaking a sweat? No problem! We've got some simple, no-fuss pointers that will help you nail this ratio every time. You've got this!
Get the Cheatsheet NowNot Finding What You Are Looking For?
Let me know what terms, ratios or content you want to see covered.
Request Term or Ratio
Am I missing a key term or ratio? Let me know what you want to see covered.
Request Content
Do you have a topic idea you'd like to see covered? Send it my way.
Checkout Courses
Enhance your skills through a deeper understanding of your customers' businesses.
A bit about me
Greetings! I'm Clay Sharkey, and there is nothing I like more than assisting others in achieving their goals. I firmly believe that by enhancing a banker's understanding of their customer's' business, they can provide superior service. This superior service, in turn, leads to stronger relationships for the bank, improved performance for the businesses, and better experiences for our communities. Win-win-win.
