The equity of a company, or shareholders' equity, is the net difference between a company's total assets and its total liabilities. A company's equity is used in fundamental analysis to determine its net worth.
Shareholders' 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 Shareholders' Equity
The formula for calculating shareholders' equity is below:
Shareholder’s Equity=Total Assets−Total Liabilities
You can find a company's total liabilities and total assets on its balance sheet.
Example of Shareholders' Equity
- 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 shareholders' equity represents the amount left for shareholders if Apple liquidated all of its assets and paid off all of its liabilities.
Shareholder's equity is an effective metric for determining the net worth of a company, but it should be used in tandem with analysis of all financial statements, including the balance sheet, income statement, and cash flow statement.