Ways to Increase Equity on a Balance Sheet

by Keela Helstrom

In accounting terms, a company's equity balance represents its net worth and may be calculated as a company's total assets minus its total liabilities. Presented on a company's balance sheet, equity may be increased by deliberate actions such as a company layoff, budget restrictions and a price increase, or it may result from higher than budgeted net earnings for a company's fiscal year.

Reduce Employee Costs

Since employee wages and benefits comprise a large part of a company's costs, equity can be increased by reducing, eliminating or suspending employee-sponsored benefits for an established period if this is possible. This includes paid holidays, personal days, employee bonuses and employee raises. Employee hours may be reduced, and overtime may be completely eliminated.

Increase Shareholder's Capital

It is common for companies to raise equity by issuing new shares of preferred and common stock to investors. The issuing company must be incorporated to issue shares of stock. When a company sells its shares to investors, the shareholders hold a portion of ownership interest in the company and are able to vote on significant matters affecting the organization. They are also entitled to any dividends that are announced by the board of directors.

Reduce Manufacturing Costs

Manufacturing costs are incurred to convert raw materials into finished goods and to prepare merchandise for sale. These costs include material costs, plant labor and manufacturing overhead. A company may choose to reduce manufacturing costs by using lower-cost materials, improving production efficiency and outsourcing part of its production to a cost-efficient, lower-cost region. A company may also implement a budget to reduce spending on unnecessary costs.

Close an Office

When a company closes an office location, it might result in an increase in equity. The office closing does not necessitate the firing of employees, because the employees may work at other office locations or from home. The office closing will reduce the expenses paid to maintain the office, such as rent, utilities, maintenance and insurance.

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