Could i please have clarification of the following terms i think i know what they are but would just like to be correct.

Share premium account

Share capital

Shareholders equity

Thank you

Share Premuim Account - Refers to the payment or future payment by a shareholder for shares at a premium to the current share price

Share Capital - Refers to capital received from share issues to investors

Shareholder Equity - Assets minus liabilities. That is how much equity the company has or how much the company is worth based on assets it posesses.

is the share capital the par value and the share premium account how much above the par value the shares are worth . Can you guage a companys growth by its share premium account .

No, that's wrong.

Share capital is simply what the company received from investors when they issued shares.

Example:

Sold 10,000 shares @ 5 pounds each = share capital of 50,000 pounds.

Share Premium is the premuim to the current share price which an investor or an institution will pay.

Example:

Current Share Price = 5 pounds

Investor is willing to purchase 10,000 shares at 6 pounds = Share Premium of 10,000 pounds.

Well i cant see what i said is wrong the share premium seems to be the above price that people are willing to pay above the share capital when it was first issued.

Let me try to clarify this a bit more.

Share premuim is not what people are willing to pay above the current price.

It is what an individual investor, group of investors institutions are willing to offer for the company usually in regards to a takeover.

What the general public is willing to pay is not imortant, what the market thinks the company is worth is not important.

It will appear on balance sheets after the company either agreed to a full takeover or sold a rather large portion to either one of the above.

Example 1:

Full Take-Over - Current Share Price 10.00p/share - Offer 13.50p/share = Share Premium of 3.50p/share.

Example 2:

Sale of 20% of the Company - Current Share Price 10.00p/share - Offer for 20% @ 12.00p/share = Share Premium of 2.00p/share.

It is not important what other people think the company is worth and once Share Premium shows in the balance sheet it is a done deal between the two parties, regardless of what other investors believe.

If that is what you refered to then you were right. I just had the impression you thought it is what people are willing to pay for it and that was not correct.

Might have been a misunderstanding.