The Shareholders Are the Owners of a Company REQUIRED:
A)Briefly Explain the Meaning of Each of the Four

question 43

Essay

The shareholders are the owners of a company. The shareholders' equity of Adventure Travel Agency Pty Ltd is set out below. (Note that all shares were issued when the company was originally set up and there have been no subsequent issues.)
Adventure Travel Agency Pty Ltd
Statement of Financial Position (extract)as at 30 June 2018
Shareholders' equity
Share Capital -
$\begin{array}{ll}60,000 \text { ordinary shares sold for } \$ 10 \text { each } & \$ 600,000 \\\text { Retained profits } & 20,000 \\\text { General reserve } & 12,000 \\\text { Asset revaluation reserve } & \underline{180,000} \\\text { Total equity } & \$ 812,000\end{array}$ REQUIRED:
a)Briefly explain the meaning of each of the four components of shareholders' equity, giving an example of how each might have arisen.
b)Indicate which of the four components are legally available for the payments of cash dividends.
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Definitions:

Capital Intensity Ratio

A measure of the amount of capital needed per dollar of revenue, indicating the investment required for a company to maintain its current level of production.

Full Capacity

The maximum level of output that a company can sustain over a period of time without increasing the production resources.

Long-term Debt

Borrowings or financial obligations that are due for repayment over a period longer than one year.

Capital Intensity Ratio

A financial measure that indicates the amount of assets or capital required to generate a dollar of revenue, illustrating the capital efficiency of a company.