1. What is Shareholders Equity?

Shareholders Equity (also called stockholders equity) represents the residual interest in the assets of a company after deducting liabilities. It's a key measure of a company's net worth and financial health.

2. How Does the Calculator Work?

The calculator uses the fundamental accounting equation:

Where:

• \( SE \) — Shareholders Equity (in currency)
• \( Assets \) — Total assets of the company
• \( Liabilities \) — Total liabilities of the company

Explanation: This equation shows what would remain for shareholders if all assets were liquidated and all debts paid.

3. Importance of Shareholders Equity

Details: Shareholders equity is crucial for assessing a company's financial stability, determining book value per share, and evaluating whether a company can cover its obligations.

4. Using the Calculator

Tips: Enter total assets and total liabilities in currency values. Both values must be positive numbers. The calculator will compute the shareholders equity.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between shareholders equity and market capitalization?
A: Shareholders equity is based on book values from the balance sheet, while market cap is share price times outstanding shares (market value).

Q2: Can shareholders equity be negative?
A: Yes, when liabilities exceed assets. This indicates financial distress and is called "negative equity."

Q3: How does retained earnings affect shareholders equity?
A: Retained earnings (profits not paid as dividends) are a component of shareholders equity and increase it over time.

Q4: What's included in shareholders equity?
A: Typically includes common stock, preferred stock, retained earnings, and treasury stock (as a negative).

Q5: Why is shareholders equity important for investors?
A: It helps assess a company's net worth, financial health, and ability to pay dividends or survive downturns.