A:

Company equity, or shareholders' equity, is the net difference between a company's total assets and total liabilities. A company's equity is used in fundamental analysis to determine its net worth.

Shareholder equity represents the net value of a company, or the amount of money left over for shareholders if all assets were liquidated and all debts repaid. 

How to Calculate Shareholder Equity

A company's total liabilities and total assets are listed on the balance sheet. The formula for calculating shareholders' equity is below:

Example of Shareholders' Equity 

Below is the balance sheet for Apple Incorporated (AAPL) as of May 1, 2018.  

  • Total assets (in green) were $367,502 billion. 
  • Total liabilities (in red) were $240,624 billion. 
  • Shareholders' equity was $126,878 billion or ( $367,502 - $240,624).

The value of $126,878 billion in shareholder equity represents the amount left for shareholders if Apple liquidated all of its assets and paid off all of its liabilities.

The shareholder's equity section of the balance sheet can also be used to calculate company equity. An alternative calculation of company equity is the value of share capital and retained earnings less the value of treasury shares.

Shareholder's equity is an effective metric for determining the net worth of a company but should be used in tandem with analysis of all the financial statements including the balance sheet, income statement, and cash flow statement.

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