The components of shareholder equity - Deepstash
Equity

Equity

investopedia.com

9

Keep reading for FREE

The components of shareholder equity

  • Retained earnings. It is the percentage of net earnings not paid to shareholders as dividends. You can also think of retained earnings as savings as it is put aside for future use.
  • Treasury shares or stock is the stock a company has repurchased from existing shareholders. Companies can reissue treasury shares back to stockholders when companies decide to raise money.

64

84 reads

Understanding shareholder equity

  • Equity is used as capital raised by a company, which is used to buy assets, invest in projects, and fund operations.
  • Investors typically look for equity investments as it provides a greater opportunity to share in the profits and growth of a company.
  • Equity represents the value of an investor's stake in a company and is represented by their portion of the company's shares.
  • Owning stock in a company gives shareholders the potential for capital gains and dividends.

65

99 reads

Home equity and brand equity

Home equity is the value of a home minus the mortgage debt owed. A homeowner can use home equity to get a home equity loan - otherwise known as a second mortgage.

Brand equity. Assets may include tangible assets, like property, and intangible assets, like a company's brand identity. Brand equity measures the difference between the value of a brand and a generic version of a product, for example, Coke vs a store brand cola.

60

73 reads

Private equity

Private equity is the evaluation of companies that are not publicly traded. Only "accredited" investors can access private equity, but regular investors can make use of exchange-traded funds (ETFs).

  • Private companies can find investors by selling off shares directly in private placements.
  • Private equity is often sold to funds and investors specialising in direct investments in private companies.
  • Private equity can also engage in leveraged buyouts (LBOs) of public companies - the company receives a loan from a private equity firm to fund the acquisition of another company.

64

48 reads

Other types of equity

We can think of equity as a degree of ownership in any asset after deducting all debts associated with that asset.

Common variations on equity:

  • A stock or other security representing an ownership interest in a company.
  • On a company's balance sheets, the funds contributed by the owners or shareholders plus retained earnings (or losses).
  • In margin trading, the value of securities in a margin account minus the amount the account holder borrowed from the brokerage.
  • In real estate, the property's current fair market value less the amount the owner still owes on the mortgage.

64

50 reads

Understanding equity

Equity has different meanings depending on the context. Shareholder's equity is the most common type of equity - it represents the amount of money that a company's shareholders will get if all of the assets were liquidated and all the debt was paid off.

Equity can be found on a company's balance sheet. Analysts use this data to assess the financial health of a company.

74

519 reads

Venture capital funding

Usually, a new company with no revenue or earnings can't afford to borrow. It gets capital from friends, family, or individual "angel investors."

  • Venture capitalists (VCs) come into play when the company is ready to bring its product or service to market. 
  • VCs provide private equity financing in return for an early minority stake. They may take a seat on the board of directors for their portfolio companies.
  • VCs try to hit big early on and exit investments within five to seven years.

63

96 reads

Formula and calculation for shareholder equity

Shareholders' Equity = Total Assets - Total Liabilities

The information for this formula can be found on the company's balance sheet by using the following steps:

  1. Find the company's total assets for the period.
  2. Find the total liabilities, listed separately on the balance sheet.
  3. Subtract total liabilities from total assets to find the shareholder equity.

A less common method to find the shareholder equity is the company's share capital and retained earnings less the value of treasury shares.

64

101 reads

CURATED BY

summers_wdd

"Money does not guarantee success." ~ Jose Mourinho

MORE LIKE THIS

Warren Buffett: How He Does It

Warren Buffett: How He Does It

investopedia.com

What Is an Initial Public Offering (IPO)?

What Is an Initial Public Offering (IPO)?

investopedia.com

Ready for the next level?

Read Like a Pro

stash-superman-illustration

Explore the World’s

Best Ideas

200,000+ ideas on pretty much any topic. Created by the smartest people around & well-organized so you can explore at will.

An Idea for Everything

Explore the biggest library of insights. And we've infused it with powerful filtering tools so you can easily find what you need.

Knowledge Library

Powerful Saving & Organizational Tools

Save ideas for later reading, for personalized stashes, or for remembering it later.

# Personal Growth

Take Your Ideas

Anywhere

Organize your ideas & listen on the go. And with Pro, there are no limits.

Listen on the go

Just press play and we take care of the words.

Never worry about spotty connections

No Internet access? No problem. Within the mobile app, all your ideas are available, even when offline.

Get Organized with Stashes

Ideas for your next work project? Quotes that inspire you? Put them in the right place so you never lose them.

Join

2 Million Stashers

4.8

Stars

5,740 Reviews

App Store

4.7

Stars

72,690 Reviews

Google Play

Sean Green

Great interesting short snippets of informative articles. Highly recommended to anyone who loves information and lacks patience.

Ashley Anthony

This app is LOADED with RELEVANT, HELPFUL, AND EDUCATIONAL material. It is creatively intellectual, yet minimal enough to not overstimulate and create a learning block. I am exceptionally impressed with this app!

Shankul Varada

Best app ever! You heard it right. This app has helped me get back on my quest to get things done while equipping myself with knowledge everyday.

samz905

Don’t look further if you love learning new things. A refreshing concept that provides quick ideas for busy thought leaders.

Ghazala Begum

Even five minutes a day will improve your thinking. I've come across new ideas and learnt to improve existing ways to become more motivated, confident and happier.

Giovanna Scalzone

Brilliant. It feels fresh and encouraging. So many interesting pieces of information that are just enough to absorb and apply. So happy I found this.

Laetitia Berton

I have only been using it for a few days now, but I have found answers to questions I had never consciously formulated, or to problems I face everyday at work or at home. I wish I had found this earlier, highly recommended!

Jamyson Haug

Great for quick bits of information and interesting ideas around whatever topics you are interested in. Visually, it looks great as well.

Read & Learn

20x Faster

without
deepstash

with
deepstash

with

deepstash

Access to 200,000+ ideas

Access to the mobile app

Unlimited idea saving & library

Unlimited history

Unlimited listening to ideas

Downloading & offline access

Personalized recommendations

FAQ

Claim Your Limited Offer

Get Deepstash Pro