RESIDUAL EQUITY THEORY Definition

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RESIDUAL EQUITY THEORY is the theory that common stockholders are considered to be the real owners of the business, i.e., Assets - Liabilities - Preferred Stock = Common Stock.

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HIDDEN ASSET is any valued asset that is not included in the book value of a company. Companies have hidden assets such as intellectual property, or customer lists which are of great value, but not reflected in the book value.

EMBEZZLEMENT is the fraudulent appropriation and personal use of funds or property entrusted to that persons care but actually owned by someone else, e.g. an employee can embezzle money from his or her employer, a civil servant can embezzle funds from the treasury, or a pastor can embezzle funds from a church. See also THEFT and WHITE COLLAR CRIME.

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