What Is Paid-Up Capital?

Paid-up capital is the amount of money a company has received from shareholders in exchange for shares of stock. Paid-up capital is created when a company sells its shares on the 澳洲幸运5开奖号码历史查询:primary market directly to investors, usually through an 澳洲幸运5开奖号码历史查询:initial public offering (IPO).

When shares are bought and sold among investors on the 澳洲幸运5开奖号码历史查询:secondary market, no additional paid-up capital is created as proceeds in those transactions go to the sellꦗing shareholders, no🌠t the issuing company.

Understanding Paid-Up Capital

Paid-up capital, also called paid-in capital or 澳洲幸运5开奖号码历史查询:contributed capital, is arrived at from two funding sources: the 澳洲幸运5开奖号码历史查询:par value of stock and excess🐓 capital. Each share of stock is issued with a base price called its par. Typically, this value is quite low, often less than $1. Any amount paid by investors that exceeds the par value is considered additional paid-in capita🧔l or paid-in capital in excess of par.

In the shareholders' equity section of the 澳洲幸运5开奖号码历史查询:balance sheet, the par value of issued shares is listed as com꧃mon stock or preferred stock. Share capital may appear as:

• Paid-up capital to represent funds already received from investors
• 澳洲幸运5开奖号码历史查询:Called-up capital to represent funds due to the company
• Paid-in capital to represent funds that satisfy the full purchase price of the shares
  

Paid-Up Capital vs. Authorized Capital

When a company wants to raise equity, it cannot simply sell off pieces of the company to the highest bidder. Businesse🥃s must request permission to issue public shares by filing an application with the agency responsible for the registration of compani🦂es in the country of incorporation.

The maximum amount of capital a company is given permission to raise via the sale of stock is called its authorized capital. Typically, the amount of authorized capital a company applies for is much higher than its current need. This is done so that the company c𝄹an easily sell additional shares down the road if the need for further equity arises. Since paid-up capital is only generated by the sale of shares, the amount of paid-up capital can never exceed🉐 the authorized capital.

The Bottom Line

Paid-up capital represents money that is not borrowed. A company that is fully ✨paid-up has sold all available shares and thus cannot increase its capital unless it borrows money by taking on debt. A company could, however, receive authorization to sell more shares.

A company's paid-up capital figure represents the extent to which it depends on 澳洲幸运5开奖号码历史查询:equity financing to fund its operations. This figure can be compared with the company's level of debt to assess if it has a ﷽healthy balance of financing, given its operations, business model, and prevailing industry standards.