Stockholders' Equity

DEFINITION of 'Stockholders' Equity'

The portion of the balance sheet that represents the capital received from investors in exchange for stock (paid-in capital), donated capital and retained earnings. Stockholders' equity represents the equity stake currently held on the books by a firm's equity investors.

It is calculated either as a firm's total assets minus its total liabilities, or as share capital plus retained earnings minus treasury shares:

Stockholders' Equity



Also known as "shareholders' equity".

BREAKING DOWN 'Stockholders' Equity'

Stockholders' equity is often referred to as the book value of the company, and it comes from two main sources. The first and original source is the money that was originally invested in the company, along with any additional investments made thereafter. The second comes from retained earnings that the company is able to accumulate over time through its operations. In most cases, especially when dealing with older companies that have been in business for many years, the retained earnings portion is the largest component.

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RELATED FAQS
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  2. What is the difference between carrying value per share and earnings per share?

    Carrying value per share, more commonly referred to as book value of equity per share or BVPS, and earnings per share, or ... Read Full Answer >>
  3. How can I calculate the leverage ratio using tier 1 capital?

    The tier 1 leverage ratio is used to determine the capital adequacy of a bank or a holding company, and it places constraints ... Read Full Answer >>
  4. Do stock splits and stock dividends affect stockholder equity?

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  5. What is the impact of retained earnings on stockholders equity?

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