Identify the two primary sources of stockholders equity, and which source would be considered to be internally generated? Solution Stockholders equity is built on two parts Paid Up capital: When initially shares are issued in an IPO to the public the stockholder\'s equity has two parts i.e. face value of shares and the additional paid up capital i.e. price at which share was sold in the IPO less the face value. Retained Earnings: Retained earnings form the second component of the Stockholder\'s equity. Each year a part of Net Income might be paid off by the company as dividend to preferred and common share holders. The amount left after paying dividends is called retained earning and is added to stock holder\'s equity. Retianed earnings are the internally generated source of stockholder\'s equity becasue it comes from the earnings of the organization which are generated by selling products and not by accessing capital markets. .

1. Identify the two primary sources of stockholders equity, and which source would be considered
to be internally generated?
Solution
Stockholders equity is built on two parts
Paid Up capital: When initially shares are issued in an IPO to the public the stockholder's
equity has two parts i.e. face value of shares and the additional paid up capital i.e. price at which
share was sold in the IPO less the face value.
Retained Earnings: Retained earnings form the second component of the Stockholder's equity.
Each year a part of Net Income might be paid off by the company as dividend to preferred and
common share holders. The amount left after paying dividends is called retained earning and is
added to stock holder's equity.
Retianed earnings are the internally generated source of stockholder's equity becasue it comes
from the earnings of the organization which are generated by selling products and not by
accessing capital markets.