Stockholders' Equity

AAA

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".

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Treasury Stock (Treasury Shares)

    The portion of shares that a company keeps in their own treasury. ...
  2. Shareholders' Agreement

    An arrangement among a company's shareholders describing how ...
  3. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  4. Equity

    1. A stock or any other security representing an ownership interest. ...
  5. Asset

    1. A resource with economic value that an individual, corporation ...
  6. Paid In Capital

    The amount of capital "paid in" by investors during common or ...
Related Articles
  1. Reading The Balance Sheet
    Investing Basics

    Reading The Balance Sheet

  2. Stock Basics Tutorial
    Investing Basics

    Stock Basics Tutorial

  3. Why Do Companies Care About Their Stock ...
    Investing Basics

    Why Do Companies Care About Their Stock ...

  4. Knowing Your Rights As A Shareholder
    Investing Basics

    Knowing Your Rights As A Shareholder

Hot Definitions
  1. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  2. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  3. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center