What does Capital Surplus mean?
"I think it's easiest to illustrate it with an example... if you've already read any of the definitions out there, then you know what it means, but just don't understand what it means.  So, we have an ice cream shop. We started it as partners, and now you and I each own 50% of the company. It's doing so well that we decide to take it public.  That means that we will be giving up some of our ownership in return for a chance to own a smaller portion of a bigger thing. With the money that we raise from selling stocks, we're going to open up two more stores.  So, without getting into too much of the nitty gritty accounting that would turn this into a valuation question, let's say we are going to put 30% of the company up for sale with these stocks, leaving you and me with 35% each. We file with the SEC saying we're splitting up the company ownership with 100,000 shares, and so you and I each have 35,000 shares and we sell 30,000 to investors.  Then, and this depends on the state in the US where you're registering your publicly traded corporation, those shares must be assigned a par value that a shareholder can redeem the shares at. Many corporations will use $1 or 10 cents or something nominal.  And we go and find investors who will actually pay us $5 per share for our ice cream shop business. We receive $150,000 in new capital. But when we record that in our accounting, $5 in total capital per share was contributed by investors to the business and is recorded as shareholder's equity. $1 per share (totalling $30,000) goes towards actual shares outstanding, and $4 per share (totalling $120,000) goes towards capital surplus.  These amounts will not change unless we issue new stocks. The share prices on the open market can fluctuate, but we rarely would adjust these. Edit: I couldn't see the table before. DumbCoder has already pointed out the equation Capital Surplus = [(Stock Par Value) + (Premium Per Share)] * (Number of Shares) Based on my example, it's easy to deduce what happened in the case you've given in the table. In 2009 your company XYZ had outstanding Common Stock issued for $4,652. That's probably (a) in thousands, and (b) at a par value of $1 per share. On those assumptions we can say that the company has 4,652,000 shares outstanding for Year End 2009.  Then, if we guess that's the outstanding shares, we can also calculate the implicit average premium per share: 90,946,000 ÷ 4,652,000 == $19.52. Note that this is the average premium per share, because we don't know when the different stocks were issued at, and it may be that the premiums that investors paid were different. Frankly, we don't care.  So clearly since ""Common Stock"" in 2010 is up to $9,303 it means that the company released more stock. Someone else can chime in on whether that means it was specifically a stock split or some other mechanism... it doesn't matter. For understanding this you just need to know that the company put more stock into the marketplace... 9,303 - 4,652 == 4,651(,000) more shares to be exact. With the mechanics of rounding to the thousands, I would guess this was a stock split.  Now. What you can also see is that the Capital Surplus also increased. 232,801 - 90,946 == 141,855. The 4,651,000 shares were issued into the market at an average premium of 141,855 ÷ 4,651 == $30.50. So investors probably paid (or were given by the company) an average of $31.50 at this split.  Then, in 2011 the company had another small adjustment to its shares outstanding. (The Common Stock went up). And there was a corresponding increase in its Capital Surplus.  Without details around the actual stock volumes, it's hard to get more exact. You're also only giving us a portion of the Balance Sheet for your company, so it's hard to go into too much more detail. Hopefully this answers your question though." Capital surplus is used to account for that amount which a firm raises in excess of the par value (nominal value) of the shares (common stock).. Investopedia has a much simpler answer. Somebody has tried to be smart on wikipedia and have done the calculations without much explanation. The portion of the surplus of a business arising from sources other than earnings :  all surplus other than earned surplus usually including amounts received from sale or exchange of capital stock in excess of par or stated value, profits on resale of treasury stock, donations to capital by stockholders or others, or increment arising from revaluation of fixed or other assets The number of shares a company wants to issue is decided and agreed with the regulators. They decide the par value and then decide how much premium will be charged, extra money above the par value. Take out any RHP of an issue and you find all these details. Par Value = 1  Issue price(Price at which investors buy) = 10 Premium = 9 For a single share the capital surplus is 9, multiply it by the number of shares issued and you have the total capital surplus.
"I hope I'm misunderstanding your plan... you want to invest in a way that will make SO MUCH that you pay back all of the loan payments with investment gains? Like the answer I gave on the preceding question, and like @littleadv's comment/mhoran's answers... don't do this. No good will come of it.  This strategy requires higher returns, but does not necessarily give you a better return.   But because you asked the question again, let me specify what you're missing... I do think that learning is a good thing. It boils down to two very significant problems that you haven't addressed:  (1) Where are you getting your monthly ""income"" from?  (2) Realistic vs. Daydreaming--How big do any gains have to be and does that exist in the real world in a way that you can capture?  In a nutshell, if my answer to the last question showed that it's crazy to invest and pay back out of your capital and income... since you're trying to keep your capital and only pay back with monthly gains, this one will require even higher and thus more unrealistic gains.  The model you're implying:  If that's what you mean with this model, (which I think you do), then here are my two very key questions again: How are you getting your monthly income? Financial investments (i.e. stocks or bonds) will have two components of value. One component of value is the stream of payments, such as a monthly dividend from stocks that pay those, or the interest payment from a bond. The other is the ability to resell a security to another investor, receiving back your capital.  So... you either have to find Bonds//Dividend stocks that pay >52% returns tax-free each year, and pay this loan off with the payments. (Or higher returns to cover taxes, but these kinds of investments do not exist for you.)  OR you can try to invest in something, pray that it goes up ≥4.323% per month and so that you can sell it, pay back your loan payment with the proceeds, and use the capital to buy your next investment... that will go up 4.323% per month, to turn and sell it again.  The pros that do model this type of speculation go into much more depth than you are capable of. They build models that incorporate probabilities for rates of return based on historical data. They have better information, and have specialized in calculating this all out. They even have access to better investment opportunities (like pre-IPO Twitter or private notes). You just won't find the opportunities to make this happen, each month, for 24 months. (Again, you won't find them. They do not exist for you in as an investor in securities) Realistic vs. Daydreaming So... clearly I hope that by now I have convinced you that these would be the required returns. They simply aren't available to you. If they were, you would still run into obstacles with converting 'book' returns into physical money that you could repay the loans with, and then continuing that growth.  And while I appreciate the notion that 'if I could just make the payments each month, I'd have $10,000 after 24 months!' I guarantee you that you'll be better off finding another way to target that same investment.  Along the lines of what mhoran said, if you aim for a basic 401K or other similar investment account and target it into the S&P500, you might see returns of anywhere from -25% to +25% over the next 24 months... but if things went like they tend to average for the S&P500, it's more like ~7% annually. Check out a ""savings target calculator"" like this one from Bankrate.com and put in the numbers... if you can save about $390 a month you'll be at $10K in 24 months. It's not as fun as the other, but you can actually expect to achieve that.  You will not find consistent >50% returns on your money annually." Capitalism assumes people are selfish?  Or it accounts for both sides?  Capitalism actually does none of the above.  Capitalism simply says that Capital is the means of trade and financial growth.  Pure Capitalism would mean that Capital is used for every transaction that can influence Trade and Growth.  That is impossible.  Capitalism neither adjusts for, nor makes rules about, whether people are Selfish, Selfless, or somewhere in-between.    Capitalism does promote Selfishness, but isn’t based on Selfishness.  It is based on Capital.  To give Capitalism any other extraordinary properties is to fail to see it for what it is.  I’ve been hearing people associate Capitalism as the cause for tons of modern things:  Roads, Medicine, even the Space Program.  But Capitalism didn’t do any of those.  Where did this foolishness come from? People made Roads, Medicine, and the Space Program.  Capitalism was the market style they used, because it is the prevalent style in America.  But it is just a tool, a method, and not some gift of amazing abilities.  It simply makes Capital the standard for exchange and financial growth. Using cash to purchase a home allows you access to certain deals that mortgage buyers cannot take advantage of.  These are typically distressed properties and need to be moved off the books quickly.  Think of things like foreclosures and auctions. This does not mean that it gives you an advantage with every house on the market.  While you may be able to close quickly, with cash, some buyers may choose to wait for the (presumably) higher offers of mortgage buyers.   There are complications to purchasing in cash then mortgaging to replace that cash.  Namely, how was that cash invested?  If one were in mutual funds or stocks, with the money, one will have to pay capital gains tax on any profit.  If those investments increase in value, during the time the money is tied up, what do you do then?  Do you buy at the higher value or hold it back and dollar cost average it in? Whether it's wise or not depends on what you think and what you should consider are the risks both ways. What are the risks? For Let's say that the company produces great value and its current price and initial price are well below what it's worth.  By investing some of your money in the company, you can take advantage of this value and capitalize off of it if the market recognizes this value too, or when the market does (if it's a successful company it will be a matter of when). Other reasons to be for it are that the tech industry is considered a solid industry and a lot of money is flowing into it.  Therefore, if this assumption is correct, you may assume that your job is safe even if your investment doesn't pay off (meaning, you don't lose income, but your investment may not be a great move). Against Let's say that you dump a lot of money into your company and invest in the stock.  You're being paid by the company, you're taking some of that money and investing it in the company, meaning that, depending on how much you make outside the company, you are increasing your risk of loss if something negative happens to the company (ie: it fails). Other reasons to be against it are just the opposite as above: due to the NSA, some analysts (like Mish, ZeroHedge, and others) think that the world will cut back on doing IT business with the United States, thus the tech industry will take a major hit over the next decade.  In addition to that, Jesse Colombo (@TheBubbleBubble) on Twitter is predicting that there's another tech bubble and it will make a mess when it pops (to be fair to Colombo, he was one of analysts who predicted the housing bubble and his predictions on trading are often right). Finally, there is a risk of lost money and there is also a risk of lost opportunity.  Looking at your past investments, which generally hurt more?  That might give you a clue what to do. Leverage comes in many forms.  You'll learn about things like operational leverage, financial leverage, and total leverage throughout school.  In the real world, tier 1 capital ratio has become the most commonly scrutinized because it is essentially a ratio of the core equity capital of a firm divided by the risk weighted assets (assets multiplied by a credit weighting which for most banks now a days is using the standard of Basel 2.5 and moving towards Basel III).  The multiples you talked about were references to the reciprocal of this formula.  You could reciprocate the T1C ratio and get a whole number that is the multiplier.  This multiplier would show for every 1$ in core capital, how much the firm held in risk weighted assets.  The 30x number would have represented a tier 1 cap of 3.33%.  The concept behind it being, a 10% growth in risk weighted assets with a 3.33% T1CR would result in a 300% growth in core equity capital value.  As proven in 2008, it is a double edge blade and works the same way in both directions. "an account balance is your total in the account.  The word balance means ""to be equal"". The use in finance stem from accounting. However you do not need to know why its called a balance to understand that a balance is equal to something. IE: your ""account balance"" is your total account weather its savings, electric bill, or investment portfolio. A position in your investment portfolio is what you are invested in. IE: If I went 100 shares long(I bought) Apple then I have a 100 share position in Apple. Your position is added to your account balance within your investment portfolio." "There are a few different ways you can look at this.  You can't really take money out of the economy, as it can't ""leave society"" and the economy is the interaction of society. One example kind of close to this was a multi-millionaire died without an heir with millions in his bank account. The bank will continue to use the funds, but the money itself won't be spent. Some people saw this as a ""waste"", like value was lost, but really all it does (hoarding money or even burning it) is change the money supply.  That being said there are two approaches to looking at capitalism as a *balanced* ecosystem. One is Keynesianism, which focuses on demand. The other is Marxism, which focuses on more internal mechanisms of capitalism. Both are concerned with inequality.  With high inequality, those with capital tend to have more reinvestment as a percentage of income/wealth. With a return on investment this will increase inequality. The Keynesian issue is that this will lower demand, creating imbalance in the economy and long-term problems to function. The answer was more redistribution and higher labor wages.  For Marxists, they believe that capitalism generates endless ""capital accumulation"", not because of a demand component, but because of labor theory of value. That wealth and value is not determined by the market, but at exploitation of labor. On this critical side you have critiques of the fetishism of market value. With high inequality you have money ""leaving the system"" in what some call waste--something not socially useful. Baran and Sweezy in ""Monopoly Capital"" talk about this in the form of things like military spending, and, I think, advertisement. But it can also relate to the generation of ""wealth"" (opposed to income). Things that don't hold inherent value, like art, becomes investment. You can't say it is ""taken out of "" the economy, but the value itself is generated by those who can purchase it. Though, I believe this value fetishism is more an outcome of the contradictions, rather than the cause.  What it does contribute to contradictions, however, is the rise of speculation. Rather than consumption or productive investment, accumulation will increasingly become speculative. Real estate is usually the primary example. Many people buy houses, condos, or land, not for use, but for the expectation that the value will go up. When bad enough this can reshape the market, so for people who aren't investing their rent/living cost increases.   This likewise happens with stocks and other financial investments. Again, it can't really ""leave the economy"", but it makes it more difficult for the ""traditional"" or productive and labor economy to operate." Excess capital is the primary means of navigating around a trade which is moving against you. In a very basic case, consider a long position moving against you. With additional capital you could average in as the price drops or you could write options against your position. If you don't have the capital to handle when (not if) a trade move against you then you're at a significant disadvantage as your only option may be a liquidation.