Residual Equity Theory

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Dictionary Says

Definition of 'Residual Equity Theory '

An accounting concept that says that common stockholders take the greatest risk when they buy into a company; therefore, they should have sufficient information about the company's financial standing and performance to make sound investment decisions. Residual equity is calculated by subtracting the claims of bondholders and preferred shareholders from the company's total assets.
Investopedia Says

Investopedia explains 'Residual Equity Theory '

Residual equity theory was developed by George Staubus, Professor Emeritus of Accounting at Berkeley's Haas School of Business. A company's residual equity holders take the greatest risk of all the company's stakeholders because they are the last in line to be repaid if the company goes under. Residual equity theory is one of several equity theories; the others are proprietary theory and entity theory.

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'Residual Equity Theory '

  • Valuing A Company Using The Residual Income Method

    http://www.investopedia.com/articles/fundamental-analysis/11/residual-income-model.asp
    ... Although that definition is correct in the scope of personal finance, in terms of
    equity valuation residual income is the income generated by a firm after ...

  • Learn The Lingo Of Private Equity Investing

    http://www.investopedia.com/articles/stocks/09/abcs-of-private-equity.asp
    ... important. Residual value is the market value of the remaining equity that
    the limited partners have in the fund. Private Equity ...

  • Enhance Your Portfolio With Active Equity

    http://www.investopedia.com/articles/stocks/07/enhancedactiveequity.asp
    ... Relaxation of the long-only constraint and allowing for variable exposure to residual
    risk leads us to the foundation of the enhanced active equity portfolio. ...

  • The Equity-Risk Premium: More Risk For Higher Returns

    http://www.investopedia.com/articles/04/012104.asp
    ... Under ยป Financial Theory, Investing Basics. In theory, stocks should ... offer excess
    return above the equity premium. ... common stock holders have a residual claim. ...

  • Alternative Assets For Average Investors

    http://www.investopedia.com/articles/financial-theory/08/alternative-assets.asp
    ... Equity investors, by definition, own a claim on the residual net worth of the company
    after all its liabilities have been paid off, whether this amount is a ...

  • How And Why Do Companies Pay Dividends?

    http://www.investopedia.com/articles/03/011703.asp
    ... As a result, dividend payments can come out of the residual or leftover
    equity only after all project capital requirements are met. ...

  • Accounting Basics: Financial Statements | Investopedia

    http://www.investopedia.com/university/accounting/accounting5.asp
    ... variously called stockholders equity, shareowners equity or owners equity) is the
    residual interest that remains after you subtract liabilities from assets. ...

  • David Einhorn Bets Against St. Joe

    http://stocks.investopedia.com/stock-analysis/2010/David-Einhorn-Bets-Against-St.-Joe-JOE-TRC-CTO-FCE-A1015.aspx
    ... Don't Bet the Farm While Einhorn's case theory on St. ... With a debt-free balance
    sheet, there is indeed residual value to the equity. ...

  • Financial Statements: The System | Investopedia

    http://www.investopedia.com/university/financialstatements/financialstatements2.asp
    ... The equity claim is "residual", which means shareholders ... profits increase the
    shareholders' equity account (retained ... In theory, these reinvested funds are held ...

  • Digging Into Book Value

    http://www.investopedia.com/articles/stocks/07/book_value.asp
    ... In theory, if the common shareholders decide by majority ... monetary value of the common
    shareholders' residual claim on ... net asset value or common equity of the ...

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