Stockholders' Equity

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What is 'Stockholders' Equity'

Stockholders' equity is 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
  1. What does total stockholders equity represent?

    Understand the equation for total stockholders' equity and what it represents. Learn the components of stockholders' equity ... Read Answer >>
  2. What is additional paid-in capital and how does it relate to stockholder equity?

    Understand what additional paid-in capital is used to measure, and learn how a company's additional paid-in capital effects ... Read Answer >>
  3. What is the impact of retained earnings on stockholders equity?

    Learn about the relationship between retained earnings and stockholders' equity for a corporation and how it is reported ... Read Answer >>
  4. Is par value or market value more important to stockholder equity?

    Find out about stockholders' equity, how to calculate it, and whether par or market value of stock is more important to stockholders' ... Read Answer >>
  5. Do stock splits and stock dividends affect stockholder equity?

    Learn about stockholders' equity, stock splits and stock dividends and why stock splits and stock dividends do not affect ... Read Answer >>
  6. Does stockholders equity accurately reflect a company's worth?

    Learn whether stockholders' equity accurately reflects a company's worth. Stockholders' equity is found by taking the difference ... Read Answer >>
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