Stockholders' Equity

What is Stockholders' Equity?

Stockholders' equity is the remaining amount of assets available to shareholders after all liabilities have been paid. Stockholders' equity is one of the three elements of a corporation's Balance Sheet and the accounting equation as outlined here: assets = liabilities + stockholders' equity. Stockholders' Equity is also referred to as shareholders' equity. It is calculated either as a firm's total assets less its total liabilities or alternatively as the sum of share Capital and retained Earnings less treasury shares. Stockholders' equity is the amount of capital given to a business by its shareholders, plus donated capital and earnings generated by the operation of the business, less any dividends issued.

Formula for Stockholders' Equity

On the balance sheet, stockholders' equity is calculated as:

Total assets - Total liabilities = Stockholders' equity

An alternative calculation of stockholders' equity is:

Share capital + Retained earnings - Treasury stock = Stockholders' equity

Stockholders' Equity in Balance Sheet

Paid-in Capital

Generally this subsection reports the amounts that the corporation received when it issued shares of capital stock.

Accumulated Other Comprehensive Income

This is the cumulative amount of Income (or loss) that has not been included in the net income reported on the corporation's income statement.

Retained Earnings

Generally this is the cumulative earnings of the corporation minus the cumulative amount of dividends declared.

Treasury Stock

This reduction of stockholders' equity is the amounts spent by the corporation to repurchase but not retire its own shares of capital stock.