Total Capital and Total assets

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Sam24

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Could sum1 please clarify what BS accounts make up these totals?

I nd them 4 calculations involvin ROA and ROTC.
 
If i am not mistaken then they are the same:
total asset = total capital = long term debt + current portion of short term debt + preferred shares + common shares.
 
That is what i think 2. Let me see what the others say
 
They are not the same.

It also depends on the context. If you are talking about capital structure and WACC you mean LTD plus shareholders equity.

There are other cases where capital is used in place of equity.

But in neither case isit equal to Total assets, because since

Assets=liabilities plus equity,

You have to consider that there will alwys be current liabilities on the right side of the equation
 
so then i think it would be safe to say that my above formula is only valid if the context it:

solvency ratios
liquidity ratios
profitability ratios

Please correct me if i am wrong or add to it if possible.
 
Dreambig,

According to Schweser Book 3 P. 281 Total capital includes short AND long term debt, current portion of long term debt, preferred equity, and common equity. It is the same as total assets.

According to CFAI Book 3 P 601 Total capital is all of the capital a firm employs and includes short and long term debt, and equity.


Your formula is probably not correct. It does not include short term debt also you probably meant "current portion of long term debt" rather than "current portion of short term debt" which I'm not familiar with.

I do not know whether Current Liabilities are included in Total Capital although I would suspect they are.
 
Total capital = total Assets

Assets = Equities + Liabilities

where Liabilities include:
i) Short & long term debts
ii) Deferred taxes
iii) Payables

Can someone help enlighten me on this pleasee?
I'm feeling messed up because of this topic!
HELP!
 
It is annoying that there are 3 names for every concept in FSA.
 
I am even more confused but i would have to agree with chasinggoats if push comes to shove
 
Chicago_Bull Wrote:
-------------------------------------------------------
> Total capital = total Assets
>
> Assets = Equities + Liabilities
>
> where Liabilities include:
> i) Short & long term debts
> ii) Deferred taxes
> iii) Payables
>
> Can someone help enlighten me on this pleasee?
> I'm feeling messed up because of this topic!
> HELP!


Not much to be confused about. Hope this helps

(i) Liabilities:
- Long term debt: this is debt with maturity beyond 1 year or one operating cycle, whichever is longer (like notes or bonds a company issues, with a maturity longer than 1 year, or like borrowings from the banks for a loan repayment period longer than 1 year). On a personal note, like a mortgage you would take to buy a house.
- Current portion of the long term debt: payments toward the principal and interest for the long term debt � like the monthly/annual mortgage payments that you would need to make
- Short term debt: usually in the form of loans taken out by companies from the banks, with a maturity of up to 1 year or 1 operating cycle, whichever is longer � like you borrowing $1,000 from your friend and promising him/her that you would repay it in the next 4 months.

(ii) Deferred taxes: are a company�s liabilities toward the government/IRS for taxes. Because of the differences between what companies can deduct for tax purposes and for reporting to shareholders (accounting purposes), there are temporary or permanent differences between the taxable income (on the tax report) and income before tax (on the income statement). These could be deferred tax assets or liabilities. If you did not get to deferred taxes yet, that�s a different animal for which explanatory posts have been previously made on this forum (use the search function when you get there).

(iii) Payables: are current liabilities, expenses incurred and not yet paid, therefore short-term: like say you accrued for employees� salaries (but have not paid yet), you received inventory (but have not paid yet to your supplier). Generally, payables refer to obligations toward suppliers.
 
What's the source of capital? isn't from Owners and investors? If we agree on that then:

Total Asset= Total capital only at the inception of the firm.

Now let's take it the other way around:

If we assume that Total assets= Total Capital then Total capital= Total Liabilities(Base on accounting equation)
However for a firm already in business total capital<total liabilities.
If total capital inferior at total liabilites then total capital is inferior at total asset.

to conclude total asset = total capital at the inception of the firm (1)
For a firm already in activity Total Asset>Total Capital(2)

Now sometimes capital can be taken into a broader context: Capital gain, capital goods and so on.
 
Giristide, it sounds to me that you're getting "sources of capital" and "sources of financing" confused in this sense
 
Your first comment was "What's the source of capital? isn't from Owners and investors?"

What you are talking about there is the source of financing for the firm (where they intially get their money). Companies can also continue to get more financing, so it doesn't need to just be at inception (for example, issuing a new bond or shares).

People are right when they post that
Total Capital = Total Assets and
Assets = Liabilities + Equity
 
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