Stockholders' Equity

Definition - What does Stockholders' Equity mean?

Stockholder's equity refers to a portion of a corporation's balance sheet that represents the capital received from investors in exchange for a share in the company (stock). In its simplest form, it is calculated as a firm's total assets minus its liabilities (debts). It may also be calculated as share capital plus the retained earnings generated by a company over time through its operations minus treasury shares. When a business must liquidate as a result of bankruptcy, stockholders are the last to be repaid.

Justipedia explains Stockholders' Equity

There are many legal requirements (both at the state and federal level) around how stockholder's equity is reported on a corporation's balance sheet. For example, state laws require that the amounts received from investors and the amounts earned through business activities be kept separate in accounting records.

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