Saturday, 26 December 2009

Shareholders' equity: the retained earnings portion is often the largest component.

Shareholders' Equity

What Does Shareholders' Equity Mean?

A firm's total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity represents the amount by which a company is financed through common and preferred shares.

Also known as "share capital", "net worth" or "stockholders' equity".

Shareholders' equity comes from two main sources.
  • The first and original source is the money that was originally invested in the company, along with any additional investments made thereafter.
  • The second comes from retained earnings which the company is able to accumulate over time through its operations. In most cases, the retained earnings portion is the largest component.

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