Definition
Shareholders' equity represents the book value of owners' stake in the company. It includes paid-in capital (from stock issuance) plus retained earnings (accumulated profits not paid as dividends) minus treasury stock. It's the denominator in ROE calculations.
Formula
Shareholders' Equity = Total Assets - Total Liabilities = Paid-in Capital + Retained Earnings - Treasury Stock
Example
Assets of $300M minus liabilities of $150M equals $150M shareholders' equity. If there are 10M shares, book value per share is $15.
FAQ
What is Shareholders' Equity?
The residual value of assets after subtracting all liabilities.
How do you calculate Shareholders' Equity?
A common formula for Shareholders' Equity is: Shareholders' Equity = Total Assets - Total Liabilities = Paid-in Capital + Retained Earnings - Treasury Stock
Why is Shareholders' Equity important?
Shareholders' Equity helps investors evaluate financial statements and make more informed decisions.