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How company total asset increased while net revenue and EPS is negative?

I looked at one company, and its yearly total asset is increasing year by year. However, its net revenue and EPS still negative. ALSO THE TOTAL equity is increasing yearly.

Can this happening that every year the shareholders paying more to increase the capital equity?

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  • You'll need to point to a specific example - there could be several reasons for this discrepancy. One common way would be issuance of debt or equity (which may be what you mean in your last sentence)
    – D Stanley
    Mar 19 at 21:09
  • What is the name of this company?
    – Flux
    Mar 20 at 13:58
  • I have 2 examples 1 nio 2 jumia
    – Aljaber
    Mar 20 at 21:11
  • Nio for example every quarter the asset is increasing while eps is negative
    – Aljaber
    May 13 at 7:02
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One common way assets increase with negative net earnings is when the company issues debt or equity to raise funds. Raising debt alone obviously will not change equity (since equity = assets - debt), but issuing new stock would increase assets (cash) and increase equity since liabilities are unaffected.

Note that the market price of already issued stock does not affect the company's balance sheet at all.

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  • Can this work in nio
    – Aljaber
    May 13 at 7:03
  • Every quarter the asset is increasing while eps is negative
    – Aljaber
    May 13 at 7:03
  • They've increased assets by issuing shares and borrowing money. Shareholders don't invest in company for current earnings, they invest for future earnings.
    – D Stanley
    May 13 at 19:24
  • Equity is representing issuing shares and
    – Aljaber
    May 16 at 2:11
  • Liability representing borrowing. Asset =liability + equity. in nio asset and equity is increasing every quarters, while eps is negative, meaning that the company is issuing shares every quarter. This is what i understand. There is no other way to increase asset and equity in the same time except getting revenue or issuing shares.
    – Aljaber
    May 16 at 2:16
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Shareholder equity increases because the company's net assets increase.

A company can have negative earnings and EPS but own valuable assets (such as real estate, intellectual property, etc.) that is rising in value. It is entirely possible the company has no revenues (or is even posting losses) but is making investments which are rising in value, thus affecting the net assets of the company. There's nothing odd about this at all.

The opposite occurs quite often too. An otherwise profitable company may see a decline in asset value for varying reasons, such as a decline in real estate holding values, unfavorable exchange rates on itf foreign currency/asset holdings, drop in the value of a wholly-owned subsidiary, and so on.

Another scenario is when a company receives deposits in one quarter from a customer but doesn't actually make delivery of the product until the next quarter, when it can actually record having earned the revenue. In such instances, the company's cash position increased immediately with receipt of the deposit but net revenue and income won't be reflected until the revenue is actually earned.

It's a mistake to equate profitability with a rise in net asset value, because there is no automatic correlation. Too many other factors come into play which can impair asset value.

And to your final question, yes, it is ALWAYS possible that overall net assets decline despite shareholders increasing their equity investment. How? The pace of declines in company holdings is faster than the rate of new capital infusion.

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  • Typically realized increases in asset values are accretive to net income, so that alone wouldn't explain an increase in assets with negative income.
    – D Stanley
    Mar 19 at 21:08
  • I understand. I was merely offering one explanation, but point taken.
    – RiverNet
    Mar 19 at 21:12
  • It could be that the company is losing money on sales but has built up a substantial inventory which counts as an asset. There are many variations of what could be going on, really.
    – RiverNet
    Mar 19 at 21:17
  • For me every time I saw nio quarter asset is increasing while eps is negative, i ask my self how shareholders adding more capital every quarters
    – Aljaber
    May 13 at 7:07

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