Shareholder equity (SE), also alluded to as stockholders' equity and shareholders' equity, can be defined as a company's owners' residual claim after obligations have been looked after.
Equity is equivalent to a company's all out resources subtracted by its all out liabilities.
Equity is found on an organization's balance sheet, it is one of the most widely recognized financial measurements used by analysts in order to analyze the financial soundness of an organization.
Shareholder equity can likewise show the net or book value of an organization.
Shareholder equity shows the sum of money that would be returned to investors if all of the assets were sold off and all of the organization's obligations were paid off.
Retained profits is a component of shareholder equity and is the percentage of net earnings that were not given out to shareholders in the form of dividend payments.
Consider retained profits as savings because it reflects a cumulative total of earnings that have been saved and set aside or held for future purposes.
The formula for calculating Shareholder Equity is as follows:
Shareholders’ equity = total assets − total liabilities
The formula above is otherwise referred to as the balance sheet equation or accounting equation.