1

I was looking at the balance sheet of a publicly traded startup and noticed that the amount of cash they have increased even though they are operating at a loss.

There's an item in the liabilities section called "Additional paid-in capital" that seems to match the increase in cash.

What does this mean? What did the company do to receive that money?

2

Every company has "capital". Even if you have a one man company, you probably stated something like "100 shares of $1 each", which means you had to take that $100 out of your own private pocket and pay it into the company.

When the company loses money and runs out of cash, they have the possibilities of (1) borrowing some money from the bank, or from a loan shark, (2) borrowing some money from the company owners, or (3) increase the share capital, for example by increasing the number of shares to 10,000 and each share holder pays his part of the $9,900. That's the case that you have here.

However, it is only a "liability" in the sense that it isn't money the company earned, it is money that the owners paid in. They have no right to get the money back; the paid-in capital is actually what the owners lose if a limited company goes bankrupt.

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  • Thanks gnasher! Is there a difference between just paid-in capital and additional paid-in capital? Is it correct that issuing new shares for a public company is a something that happens on specific dates (the first being the IPO), rather than being continuous? If so, where can I find a list of those dates for a specific company? – Matt Zeunert Aug 11 '15 at 8:28

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