[경제용어:자본잠식] 자본잠식 쉽게 파악하는 법! 자본잠식이란 무엇일까? // 이투데이_쉬운경제

이투데이TV

28 Aug 201901:45

Summary

TLDRThis video script explains the concept of capital erosion in financial terms. Capital erosion occurs when a company's total capital is less than its capital contribution, typically due to continuous losses. The script illustrates this with an example of Company A, which initially had a total capital of 100 billion won, but after incurring a loss, its total capital decreased to 75 billion won, indicating capital erosion. The capital erosion rate is calculated as the percentage of the decrease in total capital relative to the capital contribution. The video warns that severe capital erosion can lead to a company being delisted from the stock market, emphasizing the importance of understanding this financial indicator.

Takeaways

💼 Capital erosion refers to a situation where the total capital on a company's financial statements is less than the capital contributed by the owners.
📈 The total capital includes the invested capital from the business owner and the capital raised through stock issuance, plus any retained earnings from business operations.
💸 If a company continues to operate at a loss, it can deplete its retained earnings and even the invested capital, leading to capital erosion.
🏢 For example, if Company A had a total capital of 100 billion won from invested capital and retained earnings of 20 billion won, but then suffered a loss of 10 billion won, its total capital would be reduced to 75 billion won, indicating capital erosion.
📉 The capital erosion rate can be calculated as the percentage of the difference between the invested capital and the total capital, multiplied by 100.
🚨 Capital erosion signals that a company's financial health is in a precarious state.
📉 If a company's capital erosion rate reaches 50% or more, it can be designated as a managed stock item.
⏳ If the capital erosion rate is maintained at 50% or more for over two years, the company may be delisted from the stock exchange according to regulations.
💡 A total capital of zero, or a 100% capital erosion rate, is referred to as complete capital erosion, which can lead to immediate delisting.
👍 Understanding capital erosion is crucial for assessing a company's financial stability.

Q & A

What is capital erosion?
-Capital erosion refers to a situation where the total capital on the financial statement is less than the capital contributed by the business owner. It can occur when a company incurs losses that deplete not only its retained earnings but also its contributed capital.
What are the components of total capital?
-Total capital consists of the contributed capital from the business owner and retained earnings, which is the accumulated profits from business activities.
How does a company's financial performance affect its total capital?
-If a company's performance is poor, leading to losses, it can reduce its retained earnings and potentially lead to capital erosion if the losses are significant enough.
What is an example of capital erosion given in the script?
-In the example, Company A had a total capital of 100 billion won, consisting of 80 billion won in contributed capital and 20 billion won in retained earnings. However, due to poor performance, they incurred a loss of 10 billion won, reducing the total capital to 75 billion won, indicating capital erosion.
What is the formula to calculate the capital erosion rate?
-The capital erosion rate is calculated by dividing the difference between the contributed capital and the total capital by the contributed capital, and then multiplying by 100 to get a percentage.
What is the significance of a capital erosion rate of 12% as mentioned in the script?
-A capital erosion rate of 12% indicates that the company's financial health is at risk, as it shows that 12% of the contributed capital has been eroded due to losses.
What happens if a company's capital erosion rate reaches 50% or more?
-If a company's capital erosion rate reaches 50% or more, it may be designated as a management concern and could face delisting from the stock exchange if the condition persists for over two years.
What is the term for a situation where the total capital is zero?
-A situation where the total capital is zero is referred to as 'complete capital erosion,' and in such a case, the company's stock listing can be immediately revoked.
Why is it important for investors to understand capital erosion?
-Understanding capital erosion is crucial for investors as it provides insights into the financial stability and risk associated with a company's operations and investment.
What action is recommended for viewers at the end of the script?
-The script encourages viewers to like and subscribe for more content on the topic of capital erosion.

Outlines

00:00

💹 Understanding Capital Erosion

Capital erosion refers to a situation where the total capital on a financial statement is less than the capital contribution. The total capital includes the invested capital from the business owner and the capital raised through stock issuance. If the company continues to operate at a loss, not only the retained earnings but also the invested capital can be reduced, leading to capital erosion. For instance, Company A had a total capital of 100 billion won, consisting of 80 billion won from the owner's investment and stock issuance, and 20 billion won in retained earnings. However, due to poor performance, the company not only lost its retained earnings but also incurred a loss of 10 billion won, reducing the total capital to 75 billion won. This is a state of capital erosion. The capital erosion rate is calculated as (Invested Capital - Total Capital) / Invested Capital * 100%, which in this case is approximately 12%. Capital erosion indicates that a company's financial situation is very risky. If the capital erosion rate exceeds 50%, the company is designated as a management stock, and if this situation continues for more than two years, it may be delisted according to stock market regulations. Complete capital erosion occurs when the total capital is zero, leading to immediate delisting.

Mindmap

Keywords

💡Capital erosion

Capital erosion refers to a situation where a company's total capital on its financial statements is less than its capital contribution. This is a critical financial condition that indicates the company is losing value and potentially facing financial distress. In the script, it is used to describe a scenario where a company's total capital decreases due to continuous losses, leading to a state where the total capital is less than the capital contribution.

💡Total capital

Total capital, as mentioned in the script, is the sum of the invested capital by the business owner and the capital raised through stock issuance. It represents the total amount of money that has been invested into the company, including retained earnings from business activities. The script uses the example of Company A, where the total capital was initially 100 billion won, consisting of 80 billion won in contributed capital and 20 billion won in retained earnings.

💡Retained earnings

Retained earnings are the accumulated net income that a company has not paid out as dividends. They are part of the total capital and represent the reinvestment of profits back into the company. In the context of the video, retained earnings are shown to be a component of total capital, which can be reduced or even turned into a loss, contributing to capital erosion.

💡Invested capital

Invested capital, also known as contributed capital, is the money put into a company by its owners or shareholders. It is a key component of total capital and is distinct from the earnings the company generates. The script illustrates this with Company A's example, where the invested capital was 80 billion won, which is part of the total capital before any losses occurred.

💡Financial statements

Financial statements are formal records that provide a comprehensive summary of a company's financial activities. They include the balance sheet, income statement, and cash flow statement. In the video, financial statements are where the condition of capital erosion is identified, as they show the company's total capital and its comparison to the capital contribution.

💡Capital contribution

Capital contribution is the initial money or assets put into a company by its founders or investors. It is a critical part of a company's equity and is used to start and grow the business. The script discusses how capital erosion occurs when the total capital falls below this capital contribution, indicating a significant financial issue.

💡Losses

Losses in the context of the video refer to the financial losses a company incurs that reduce its retained earnings and potentially lead to capital erosion. The script uses the example of Company A, which experienced not only a decrease in retained earnings but also a loss of 10 billion won, contributing to the state of capital erosion.

💡Capital erosion rate

The capital erosion rate is a measure of the extent of capital erosion, calculated as the ratio of the difference between the capital contribution and the total capital to the capital contribution. The script provides a formula for calculating this rate and uses it to show that Company A had a capital erosion rate of approximately 12%.

💡Management focus stock

In the script, 'management focus stock' refers to a designation given to a company that has a significant level of capital erosion, specifically when it exceeds 50%. This status can lead to increased regulatory scrutiny and potential delisting if the condition persists for more than two years, as per stock market regulations.

💡Delisting

Delisting is the removal of a company's securities from a stock exchange, which can occur due to various reasons, including financial distress such as capital erosion. The script mentions that if a company's total capital falls to zero, indicating a complete capital erosion, the company's stocks can be delisted immediately.

💡Financial health

Financial health refers to the overall stability and solvency of a company, often assessed by looking at its financial statements and ratios. The script emphasizes the importance of understanding capital erosion as an indicator of a company's financial health, as it can signal potential risks and challenges the company may face.

Highlights

Capital erosion refers to a situation where the total capital on the financial statement is less than the capital contribution.

Total capital includes the invested capital and the amount invested through stock issuance.

Capital erosion occurs when a company consistently incurs losses, reducing its retained earnings and potentially its invested capital.

An example is given with Company A, which had a total capital of 100 billion won, consisting of 80 billion won in contributed capital and 20 billion won in retained earnings.

If the company's performance is poor, it may suffer losses, reducing its total capital.

Capital erosion ratio is calculated by dividing the difference between contributed capital and total capital by the contributed capital and multiplying by 100.

Capital erosion indicates that a company's financial condition is in a very dangerous state.

If a company's capital erosion ratio reaches 50% or more, it is designated as a management stock.

A company with a capital erosion ratio of 100%, indicating complete capital erosion, is immediately delisted.

Understanding capital erosion is crucial for assessing a company's financial health.

Capital erosion can lead to delisting from the stock market if not addressed.

The video provides a clear explanation of how capital erosion is calculated and its implications.

The importance of monitoring a company's capital to prevent capital erosion is emphasized.

The video uses a real-life example to illustrate the concept of capital erosion.

The consequences of capital erosion on a company's stock market status are explained.

The video concludes with a reminder to remember the concept of capital erosion for financial analysis.