Debt:

Debt is the sum of money borrowed from bank or external parties which has to be repaid after certain
years including the interest. Assuming a company’s debt means I promise to pay company’s lenders the
amount owned by the previous owner.

Equity:

Equity is one of the equal part or share into which the value of the company is divided. If I buy a
company, I buy its stock (equity) means that I actually gain ownership of the company.

Value of company=Value of its assets.

Value of Assets = Debt + Equity

BALANCE SHEET:

Shareholders fund:

The shareholders' equity, or net worth, of a company equals the total assets (what the company owns)
minus the total liabilities (what the company owes).

Share (Equity) Capital -

This is the value of funds that shareholders have invested in the company. When a company is first
formed, shareholders will typically put in cash. For example, an investor starts a company and seeds it
with $10M. Cash (an asset) rises by $10M, and Share Capital (an equity account) rises by $10M,
balancing out the balance sheet.

Retained Earnings -
This is the total amount of net income the company decides to keep. Every period, a company may pay
out dividends from its net income. Any amount remaining (or exceeding) is added to (deducted from)
retained earnings.