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Hoku Corporation Message Board

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  • wheizer wheizer Feb 14, 2008 10:18 AM Flag

    OT - Accounting question

    You are getting confused by transfers of cash affecting your investment returns. An anology would be pockets in a pair of pants. You have $100 in your right pocket. Moving $50 to the left pocket does not affect the total amount of cash you have. You just have $50 in right pocket and $50 in the left. Eacjh investment account is a pocket - some of us wear cargo pants and have many pockets. Others just have right & left pockets to worry about.

    Transfers from one pocket to another do not affect your investment return. You have $100,000 in left pocket and want to invest 1/2 so you move $50,000 to the right pocket (investment acct). You purch 4000 shs of HOKU @ $10.00 per share. total $40,000. HOKU goes to $20 per share. Your return on the HOKU stock is 100%. Your return on the investment acct is 80%. Your gain is 40,000 vs initial amt in the acct of $50,000. If you move the initial $50,000 back to your left pocket your return on investment hasn't changed.

    Hope this helps.

 
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