Financial modelling terms explained

Stockholders' Equity

Stockholders' equity, also known as shareholder's equity, is the residual interest in the assets of a corporation after deducting its liabilities.

What Is Stockholders' Equity?

Stockholders' equity is the residual interest in the assets of a company after deducting its liabilities. It comprises of the paid-in capital and the retained earnings. Paid-in capital is the amount of money that the shareholders have invested in the company. Retained earnings are the profits that have been reinvested in the company.

How Do You Calculate Stockholders' Equity?

Stockholders' equity is calculated by subtracting a company's total liabilities from its total assets. This calculation gives a company's net worth, or the amount of money that would be left if it were to liquidate all of its assets and pay off all of its liabilities. The stockholders' equity figure includes both the money that the company has borrowed and the money that its owners have invested in the company.

How Do You Calculate Shares Outstanding?

The calculation of shares outstanding begins with the total number of authorized shares. This is the maximum number of shares that a company is allowed to issue. It is set by the company's board of directors and is usually based on the amount of capital the company needs. The total number of authorized shares is then divided by the par value of a share to determine the number of authorized shares with a par value. The number of authorized shares with a par value is then multiplied by the number of shares that are outstanding to determine the total number of shares outstanding. This number is then divided by the total number of shares that are authorized to determine the percentage of shares that are outstanding.

What Is the Difference Between Stockholders' Equity and Total Liabilities and Stockholders' Equity?

The difference between stockholders' equity and total liabilities and stockholders' equity is that stockholders' equity is made up of two components: contributed capital and retained earnings. Total liabilities and stockholders' equity, on the other hand, is made up of four components: short-term debt, long-term debt, preferred stock, and common stock.

What Is the Difference Between Stockholders' Equity and Total Assets?

Stockholders' equity is the residual interest in the assets of a company after deducting its liabilities. Total assets, on the other hand, is the sum of a company's assets. This includes its cash, investments, and accounts receivable, as well as the value of its inventory and property, plant, and equipment.

What Is the Difference Between Common Stockholders' Equity and Preferred Stockholders' Equity?

Common stockholders' equity (CSE) is the amount of money that would be left for the common shareholders if a company were to liquidate. This includes the par value of the common stock, the paid-in capital over and above the par value, and the retained earnings. Preferred stockholders' equity (PSE) is the amount of money that would be left for the preferred shareholders if a company were to liquidate. This includes the par value of the preferred stock, the paid-in capital over and above the par value, and the retained earnings. The main difference between CSE and PSE is that CSE includes the retained earnings, while PSE does not.

What Is the Difference Between Retained Earnings and Stockholders' Equity?

Retained earnings are the portion of net income that is not paid out as dividends to shareholders. This amount is retained by the company to finance its operations and growth. Stockholders' equity is the portion of a company's assets that is funded by the shareholders. It includes the amount of money that has been invested by the shareholders, plus the company's retained earnings.

What Is the Difference Between Stockholders' Equity, Book Value, and Market Value?

The three terms are defined as follows:

Stockholders' equity: the total value of a company's outstanding shares, minus the total value of its outstanding debtBook value: the total value of a company's outstanding shares, minus the total value of its outstanding debt, minus the company's total liabilitiesMarket value: the total value of a company's outstanding shares, minus the total value of its outstanding debt, minus the company's total liabilities, minus the value of any preferred shares

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