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The stockholders' equity in a company measures the amount of money left over for the stockholders if the company were liquidated. The higher the shareholders' equity, the more money each share in the company would receive. Stockholders' equity is one important factor in determining the desirability of a specific company for investment. You can calculate the shareholders' equity for a company from the information listed on the company's balance sheet.
Calculate the company's total assets by adding the different categories of assets from the balance sheet. For example, if the company has current assets of $5 million and plants, property and equipment worth $95 million, the company has $100 million of total assets.Step 2
Calculate the company's total liabilities by adding the different categories of liability from the balance sheet. For example, if the company has $10 million in current liabilities and $30 million in long-term liabilities, the company has $40 million in total liabilities.Step 3
Subtract the total liabilities from the total assets to find the company's shareholders' equity. In this example, subtract the $40 million in liabilities from the $100 million in assets to find the company has $60 million in stockholders' equity.
Items you will need
- Balance sheet
- If the total liabilities exceed the total assets, the shareholders' equity is negative.
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