Stockholders' Equity

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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
  1. Is par value or market value more important to stockholder equity?

    Stockholders' equity is often referred to as the book value of a company. The market value of a company's stock is not influenced ... Read Full Answer >>
  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?

    Stockholders' equity represents the capital portion of a company's balance sheet. The stockholders' equity can be calculated ... Read Full Answer >>
  5. What is the impact of retained earnings on stockholders equity?

    Stockholders' equity is a balance sheet item that represents the capital received from shareholders plus retained earnings. ... Read Full Answer >>
  6. Which is better: A high or low equity multiplier?

    An equity multiplier measures a company's financial leverage by using a ratio of the company's total assets to its stockholders' ... Read Full Answer >>
  7. What kind of financial reporting requirements does GAAP set out?

    Per generally accepted accounting principles (GAAP), companies are responsible for providing reports on their cash flows, ... Read Full Answer >>

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