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Lately, several incidents resulting from labour disputes between mine management and the miners themselves have resulted in prolonged strikes. These strikes disrupt production and result in a drop in output that causes significant financial turmoil within the firm. Diamine Ltd are forced to sell off several prime acres above the rich deposit in order to ensure that they remain solvent. The CFO for Diamine Ltd calls an urgent meeting of the executive board. Several of Diamine’s newer shareholders have expressed their dismay at the drop in their equity and want to know why their share value is not as it was when they originally invested. The CEO tasks the CFO with explaining to the shareholders why their equity has dropped and why their claims are being labelled as ‘residual’ by the company. Clarify some of the reasons that the CFO might choose to explain the drop in shareholder equity to their shareholders.
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