Additional investment in stockholders’ equity occurs when a company issues additional shares of stock to investors. Investors purchase the shares in exchange for an ownership interest in the company. The money raised increases the company’s stockholders’ equity, which is the residual value of a company after all debts have been paid. You can calculate additional investment in stockholders’ equity using a company’s public financial records, which show the accounts that increase or decrease equity during an accounting period.
1. Examine the company’s statement of stockholders’ equity in its 10-Q quarterly or 10-K annual report. You can download these reports from the investor relations section of a public company’s website or from the U.S. Securities and Exchange Commission’s online EDGAR database.
2. Identify the amounts of beginning stockholders’ equity, ending stockholders’ equity, treasury stock purchased, cash dividends paid, and net income or net loss. Amounts of treasury stock and dividends are enclosed in parentheses because they reduce stockholders’ equity. For example, assume a company’s statement of stockholders’ equity shows $100,000 in beginning stockholders’ equity, $157,000 in ending stockholders’ equity, $5,000 in treasury stock purchased, $50,000 in net income and $8,000 in dividends paid.
3. Add together the ending stockholders’ equity, dividends paid and treasury stock purchased. In this example, add $157,000, $5,000 and $8,000 to get $170,000.
4. Subtract the beginning stockholders’ equity from your result. In this example, subtract $100,000 from $170,000 to get $70,000.
5. Subtract net income from your result or add a net loss to your result as applicable to calculate the additional investment in stockholders’ equity. Concluding the example, subtract $50,000 from $70,000 to get $20,000 in shares issued, which is the additional investment in stockholders’ equity.
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