Scenario 9.1
Jane left her job at Siemens and started her own boutique. She used to earn $50,000 annually at Siemens. She took a loan of $10,000 and used $20,000 from her personal savings to begin her venture. She agreed to repay the loan with 10% interest. Her business is bringing in $80,000 annually. She has rent and labor expenses of $15,000. Also assume that Jane could have used her own money i.e. $20,000 to buy stocks in Intel which would have returned 5% to her last year.
-The equity capital of a privately owned firm includes:
A)the owner's own dollars put into the firm.
B)the cost of raw materials.
C)the cost of labor resource used in production.
D)economic rent only.
E)the value added at each stage of production.

Question

Quizplus · Accepted Answer

Equity capital refers to the owner's own investment in the firm, including personal savings and loans taken. In this scenario, Jane used $20,000 from her personal savings and also took a loan of $10,000 to start her boutique, which constitutes her equity capital in the business. Therefore, option A is the correct answer. Options B, C, D, and E describe different types of expenses and value additions in a business, but they are not related to equity capital.

Scenario 9.1 Jane Left Her Job at Siemens and Started Her Own