The Comprehensive Guide to

Passive Income Investing


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How to Become Financially Independent Through Passive Income Investing

What is Paid-Up Capital?

Paid-up capital, also called 'paid-in capital,' is a measure of how much money investors have pumped into the company since inception in return for equity. The line item appears on the balance sheet.

How Does Paid-Up Capital Work?

Let’s assume Company XYZ decides it needs to raise $10 million in equity in order to build a new factory. It does this by issuing 100,000 shares of new stock at $100 per share.

The company records the receipt of $10 million of cash on the asset side of its balance sheet after the offering is complete. It also records the corresponding equity on the balance sheet. However, it breaks that $10 million up into two line items: the par value of the stock and anything over the par value of the stock.

Traditionally, companies assign an arbitrary par value of $0.01 to each new share of stock. Anything over that, $9.99 in our example, is recorded as additional paid in capital (APIC).

Why Does Paid-Up Capital Matter?

Paid-up capital reveals how much skin is in the game. That's not something anybody can see on the income statement or the cash flow statement, but it's important if you want to know how much shareholders have paid to play and you want to ponder whether management has used that money wisely.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.