What is stockholders' equity?


Quick Answer

Stockholder's equity is the value of the stockholder's stake in a company. It includes the company's paid-in capital, retained earnings, treasury stock and the accumulated other comprehensive income earned by a company. To calculate the stockholder's equity for a corporation, the liabilities of a company are subtracted from its assets.

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Full Answer

Stockholder's equity is reported on a corporation's balance sheet along with the assets and liabilities sections. The paid-in capital portion of the stockholder's equity includes all purchases of issued stock from the company on the direct market. Donated capital is also considered a component of stockholder's equity. Retained earnings are the cumulative earnings of the company minus any dividends declared.

Treasury stock is the value of the amount of stock purchased by the company on the open market. This does not include past stock purchases once the stock has been retired. The final component of stockholder's equity, accumulated other comprehensive income, is the cumulative amount of profit or loss not listed in the net income portion of the income statement for the company.

Stockholder's equity is also known as the book value of a company. It gives a quick look at how profitable a company is at any given moment.

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