Stockholders’ equity represents the equity that shareholders own in a company.Companies calculate it by subtracting their total liabilities from their total assets. The result is listed on their balance sheets. Stockholders’ equity is important to investors because it reveals the value of investing in a corporation. A high value usually means a company has been profitable, and will continue to do so. Stockholders’ equity comes from the money initially invested in a company and additional investments made later, plus the earnings the company is able to retain. Retained earnings tend to comprise the largest component of stockholders’ equity for older companies.