Shareholder’s Equity

Shareholder’s equity is an asset for shareholders. It total amount left after deducting total liabilities from total asset. It reflects the net worth of a company.
Shareholders’ equity= Total Asset – Total liabilities

 

To find total asset, add long-term asset (deposits, fixed assets, long term investments etc.) with current asset (cash, cash equivalents, inventory, prepaid expenses etc.) and then to get total liabilities, add long-term liabilities (Bond, Mortgage, loan etc.) with current liabilities (accounts payable, accrued expenses, deferred revenue, line of credit etc.) of the company.

Sometimes it can be a profitable one and sometime it can be a loss for shareholders who invested in a company. Before investing shareholders should investigate that is company’s asset higher than liability or not? If company has more liability and fewer assets then shareholders should not invest in that respective company.

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