Shareholders’ Equity

Definition of ‘Shareholders’ Equity’


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.

Shareholders' Equity
Also known as “share capital”, “net worth” or “stockholders’ equity”.

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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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