2 min read
Definition
Share capital is the money shareholders have put into a company in exchange for shares. It sits in the equity section of the balance sheet and represents the owners' invested stake.
In plain terms
When you start a company you issue shares; what shareholders pay for them is share capital. Many small companies start with a nominal amount, then build value through retained profit rather than more share capital.
Why it matters for your company
Share capital, alongside retained earnings, forms the equity a lender weighs against debt in the gearing ratio. A thin equity base can limit borrowing capacity; building reserves strengthens it.
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