Shareholders' equity represents the 澳洲幸运5开奖号码历史查询:net worth of a company—the dollar amoun🗹t that would be returned to shareholders if a company's total assets were liquidated ൩and all its debts were repaid. This financial metric is typically listed on a company's balance sheet and is commonly used by analysts to determine the company's overall fiscal health.

Shareholders' equity is also used to determine the value of ratios such as:

• 澳洲幸运5开奖号码历史查询:Debt-to-equity (D/E) ratio
• 澳洲幸运5开奖号码历史查询:Return on equity (ROE)
• Return on average equity (ROAE)
• 澳洲幸运5开奖号码历史查询:Book value of equity 🌃per share (BVPS)

How to Calculate Shareholders' Equity

Shareholders' equity can be calculated by subtracting a company's total liabilities from its total assets, both of which are itemized on the company's balance sheet.&nb🎐s🌜p;

$\text{Shareholders' Equity}=\text{Total Assets }-\text{ Total Liabilities}$Shareholders’ Equity=Total Assets − Total Liabilities

Total assets can be categorized as either current or non-current. Current assets are those that can be converted to cash within a year, such as accounts receivable and inventory. Long-term assets are those that can't be converted to cash or consumed within a year, such as real estate properties, manufacturing plant♑s🌺, equipment, and intangible items, including patents.

Total liabilities are also broken down into current and long-term categories. Current liabilities are debts that are due for repayment within one year, such as accounts payable and tax obligations. Long-term li🌳abilities are those that are due for repayment in periods beyond one year; they include bonds payable, leases, and pension obligations.♋

Example of Shareholders' Equity Calculation

Consider this actual balance sheet for Bank of America Corporation (BAC), taken from their 2023 annual report. The numbers for total assets and total liabilities are $3.18 trillion and $2.88 trillion, respectively. The shareholders' equity for 2023 was $292 billion.

Shareholders' equity includes preferred stock, common stock, retained earnings, and accumulated other comprehensive income.

The Bottom Line

Shareholders' equity can be negative or positive. If this figure is positive, the company has sufficient assets to cover its li♕abilities. If this figure is negative, its liabilities exceed its assets; this can deter investors who view such companies as risky. Shareholders' equity isn't the sole indicator of a company's financial health, however. It should be paired with other metrics to obtain a more holistic picture of an organization's standing.