Hortus Conclusus(SA)

Section 10/15: Equity consists of capital, capital reserves and earnings that remain within the company. These are fully owned by the company and are at its disposal to cover its risks. The better the ratio between equity and debts, the more solvent a company is. A positive equity ratio is important. A negative equity ratio (because of accumulated losses) is a severe warning sign that the continuity of the company may be threatened.

Section 9900: Gross margin or added value is net sales minus the direct costs of the goods sold. In other words: sales invoices minus purchase invoices (70/74 – 60/61). A negative gross margin is a warning sign especially when occurring over several years. It may indicate that the company has insufficient means to cover internal costs like salaries, etc.