What is Equity?
Prior to your management, shares in the ownership of your bike company were issued to the public. Through the Equity decision screen, you are able to either issue more shares or alternatively repurchase shares (equity) in your firm.
Issuing Shares is an alternative method to raise more capital (cash) in a way that doesn’t require repayments or bears interest like Long-Term Debt.
The negative effect of issuing shares (with all other variables held constant) is the dilution of ownership of your firm. This results in a reduction in the value of your Share Price and Shareholder Value (SHV).
If your firm has excess cash and no other profitable uses for it, you can choose to repurchase shares. This will reduce the number of shares among which the firm’s future profits must be distributed. Selecting the repurchase button allows you to enter a dollar value of shares to repurchase.
Repurchasing shares also improves your Debt to Equity Ratio which has a positive effect on your SHV