Answer to Question #238430 in Management for Zimvo

Question

Clarify some of the reasons that the CFO might choose to explain the drop in shareholder equity to their shareholders

Answer 1

A CFO can explain the decline in shareholders’ equity by demonstrating the cause of the deterioration using the following reasons for a drop in shareholder’s equity:

1.      Huge amounts of dividends payments resulting in a decline in retained earnings

2.      Loss accumulation is another factor causing the decline in shareholders’ equity because it is a liability to the company.