26 January 2021
Besides all this, if a firm decides to pay dividend far higher than the outstanding balance in its reserves and surplus account, it may lead to a negative or deficit networth.
If you are an equity investor, it is pertinent to keep a tab on your company’s networth. It will tell you if there are any assets left for you as a shareholder, should the company’s operations become unviable and warrant closure. If the company’s networth is negative or deficit and the entity makes losses, it may be a warning signal for you as an investor to exit your investment.
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