Shareholders' equity
Also called: net worth, book equity, owners' equity
The value left for a company's owners after subtracting all liabilities from all assets. Assets = liabilities + equity.
Shareholders' equity comes mainly from share capital (money owners put in) and retained earnings (profits kept in the business). It rises with retained profits and new share issues and falls with losses and dividends.
Equity on the balance sheet is an accounting figure, also called book value. It can be very different from the company's market capitalisation.
Example
A company with assets of ₹800 crore and liabilities of ₹500 crore has shareholders' equity of ₹300 crore.
Learn more in these lessons
- Assets, liabilities and equityWhat are assets, liabilities and equity?
- The balance sheetHow do you read a company's balance sheet?
- How the three statements connectHow are the three financial statements connected?
- Return on equity (ROE)What does return on equity tell you, and when does it mislead?
- The P/B ratioWhat does the price-to-book ratio tell you, and when should you use it?
Related terms
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