Discussion: Stockholder Equity
Describe the different components of stockholders’ equity. Access the balance sheet of a publicly traded company, and discuss what items appear in the stockholders’ equity section. Read the notes to financial statements, and discuss what disclosures are made regarding stockholder equity.
APA Referencing
Words – 300-350
Stockholder Equity
Stockholder equity can be defined as the amount of money that can be paid to the shareholders after converting all the assets to cash and paying all the debts. Positive stockholders equity is an indication that the company has adequate assets and a negative figure is an indication that the liabilities exceed the assets.
The overall value of a company can be calculated with the help of stockholder’s equity and it also helps the investors to decide whether a particular company is safe for investment.
Four components make the stockholder equity namely outstanding shares, additional paid-in capital, treasury stock, and retained earnings.
- Outstanding shares are a major component of stockholder equity. It is the number of shares that are sold by the company to its shareholders and the same has not been bought back by the company.
- Additional paid-in capital arises when the shares are directly bought by the investors from the company and it represents the extra amount paid by the investor above the face value of the shares.
- Retained earnings are the income retained by the company instead of paying the dividend to the shareholders. The amount in the retained earnings can either be used to pay the debts or make some investments.
- The final component is the treasury stock which represents the number of shares repurchased by the company from its investors.
The financial statement of Facebook is considered and the items that appear under stockholder equity in the balance sheet are common stock, additional paid-in capital, retained earnings, and accumulated other comprehensive income.
Disclosures in stockholder equity
The things that are disclosed in the stockholder’s equity are the class of shares that are issued, authorized shares, par value of the shares, amount of dividend paid, and also the issued and outstanding shares under common stock. It also includes information about share-based compensation plans and shares repurchase programs.
Reference
Golochalova, I. (2019). Analysis of the Statement of Stockholdersʼ Equity in the Context of an Institutional Platform for Small Business Sector of the Republic of Moldova. Journal of Finance and Accounting, 7(5), 136-145.
