In this section, we will explore some of the benefits and drawbacks of debt repayment, as well as some of the factors that influence the decision to repay debt. We will also discuss some of the strategies and methods that can be used to manage debt repayment effectively. By paying down debt, a company can improve its debt-to-equity ratio, as was the case with an automotive company that used its surplus to pay off high-interest loans, thus strengthening its financial position. “Reserves on the balance sheet” is a term used to refer to the shareholders’ equity section of the balance sheet. (This is exclusive of the basic share capital portion.) You might be tempted to skip the reserves area without thinking much of it. Capital surplus on a balance sheet is the additional amount of money that the buyer of the shares pays to the company during the purchase of the shares.
The result is your capital surplus, which represents the excess of your assets over your liabilities. A positive capital surplus means that your business has more assets than liabilities, and a negative capital surplus means that your business has more liabilities than assets. Your liabilities are everything that your business owes or has an obligation to, such as loans, accounts payable, taxes, wages, interest, etc. You can also find your total liabilities on your balance sheet, or add up the value of all your individual liabilities using their current or expected amounts. Capital surplus earned by the company can be invested to further the company’s base of operations and production.
Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. This amount you get from the difference is the capital surplus that goes straight to the company and the company can choose to invest this amount of cash for expansion of operations or R&D.
◦ Ensure completion of uncompleted buildings in the city
A capital surplus arises when the company’s net assets exceed its paid-in capital, often resulting from profits retained over time, asset revaluations, or direct contributions that surpass the par value of issued shares. This surplus represents a significant opportunity for a company to invest in its future, but it also poses unique challenges in terms of financial planning and risk management. Capital surplus is the excess of capital that a company has over its liabilities. It can be generated from various sources, such as retained earnings, stock issuance, asset revaluation, or debt conversion. Capital surplus can be used for various purposes, such as dividend payments, share buybacks, debt repayment, or reinvestment in the business. However, not all uses of capital surplus are equally beneficial for the company and its shareholders.
- IPA did not exist prior to the Nigerian Government’s engagement with an internationally reputable firm to design the master plan.
- As Abuja continues to grow, urban planners focus on sustainable expansion, integrating smart city technologies and eco-friendly practices.
- Phase 3 is situated a bit further away from the city centre and is still undergoing development and transformation.
- Abuja, the Nigeria capital, stands as a testament to modern urban planning and architectural innovation.
Take Your CPA Exams with Confidence
- Abuja was built according to a master plan developed in the 1980s and it replaced Lagos as Nigeria’s official capital on 12 December 1991.
- Retained earnings are profits made by the company over time, while capital surplus is the excess amount of money that the company gets when selling shares over par value.
- The creation of a capital surplus is not an end in itself but a means to facilitate sustainable growth, investment in innovation, and shareholder returns.
- Understanding the nuances between them is essential for investors, analysts, and the company’s management as they make strategic decisions and assess the company’s financial health.
- Retained earnings are the profits that the company has accumulated over time and not distributed to shareholders.
- There are different types of dividends that a company can pay, such as regular dividends, special dividends, interim dividends, and final dividends.
By carefully evaluating the various uses of surplus capital, a company can make informed decisions that support its long-term success and stability. Enhancing shareholder value is often a priority, and capital surplus can play a role here. A common method is through share buybacks, which can increase the stock price by reducing the number of shares outstanding, as seen with a multinational corporation buying back 5% of its shares, signaling confidence to the market. In the realm of corporate finance, the excess of a company’s assets over its stated capital is often earmarked as a buffer for future uncertainties or strategic initiatives.
What is Capital Surplus?
The Minister of the Federal Capital Territory serves as the administrative head of capital surplus Abuja. This position is equivalent to that of a state governor in other parts of Nigeria. The minister is responsible for overseeing the development, maintenance, and administration of the FCT. Abuja, the Nigeria capital, stands as a testament to modern urban planning and architectural innovation.
Companies leverage APIC and Contributed Surplus to strengthen their balance sheets, attract investors, and support strategic initiatives. Investors analyze APIC to gauge the premium paid over par value, reflecting market confidence and potential growth prospects. Under IFRS, APIC is reported as part of equity, with detailed disclosures required for share capital and reserves. IFRS emphasizes fair value measurement, impacting the reporting of APIC in cases of asset revaluation. This additional equity can be strategically used to support the company’s growth and operations.
Abuja
Moving the capital inland was also part of a strategy to diversify Nigeria’s economy. By shifting focus away from the oil-rich coastal regions, the government hoped to stimulate development in other areas. Abuja’s construction and ongoing expansion have created new economic opportunities beyond the traditional oil sector. The urban agglomeration centred upon Abuja had a population estimated at 3,770,000 in 2022.3 The city has a large and growing immigrant community consisting mainly of nationals from the ECOWAS sub-region. The city has been undergoing a rapid pace of physical development over the last fifteen years. Maitama II District Cadastral Zone A10 is a new district created by the FCT administration of Muhammed Bello in 2018.
Our Best Historical Slang Terms
As the Nigeria capital shifted, it marked a significant turning point in the nation’s history. As you explore Nigeria, you’ll discover that its capital, Abuja, stands as a testament to modern urban planning and cultural diversity. Located in the heart of the country, the Federal Capital Territory offers a unique blend of contemporary architecture and traditional Nigerian heritage.
Who is the Governor of Abuja
Power lines and underground cables conduct electricity to the city; the Shiroro Dam, on the Niger River southwest of Abuja, is one source. (2006) Abuja Municipal Area Council, 776,298; (2016 est.) urban agglom., 2,940,000. Capital surplus can indicate that a company is financially healthy, has a strong reputation, and has access to more funds for future investments. However, it can also imply that a company is overvalued, inefficient, or underinvested.
These might include increasing the value of fixed assets, the sale of stock at a premium, or the lowering of the par value on common stock. These other sources are often called “capital surplus” and are placed on the balance sheet. In the equity section of the balance sheet, you’ll see terms like “par value” and “shareholders’ equity,” and proprietorship reserves. Shareholders’ equity is the difference between total assets and total liabilities.
Exploring the Origins of Capital Surplus
Ariana Chávez has over a decade of professional experience in research, editing, and writing. She has spent time working in academia and digital publishing, specifically with content related to U.S. socioeconomic history and personal finance among other topics. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. This is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell the investment product mentioned.
On the other hand, retained earnings are the cumulative profits that a company has reinvested in itself rather than distributing as dividends to shareholders. This reinvestment is a testament to a company’s maturity and its management’s belief in the business’s ability to generate future returns. Retained earnings can be a war chest for future expansion, innovation, or a buffer during financial downturns.