Owners Equity

In: Business and Management

Submitted By arolewis
Words 504
Pages 3
External Reporting
Stockholders’ Equity Investors typically prefer corporations as investment vehicles. Corporations provide liability shielding and make it relatively easy to buy and sell shares. For this reason, business owners who intend to raise capital most often choose the corporate structure to do so. Owners in a corporation are called stockholders. Corporations exist to provide value to their stockholders. This value is reflected in stockholders' equity. For our paper, we decided to choose stockholders equity. This topic is one of the more important things we have learned so far. Understanding stockholders equity is essential to becoming a good investor. Stockholders' equity, also called shareholders' equity, is the owners' equity in the corporation. It appears on a corporation's balance sheet and reflects the owners' interest in the corporation. You are a stockholder whether you hold or own one share of stock in a corporation or 100 percent of the outstanding shares and are the sole owner. The shares you own, whether actual physical shares or shares documented on paper, reflect your ownership in the corporation. Owning a share of stock then will declare you as a valid shareholder within that company. On the balance sheet, assets less liabilities equal stockholders' equity. Therefore, stockholders' equity is also referred to as net worth. Stockholders' equity records how much you and other co-owners or investors have contributed to the corporation through the purchase of shares. These include any initial contributions and any additional paid-in capital. Stockholders' equity also reflects the profits your corporation has retained or distributed to shareholders. The profits retained or losses accrued are called retained earnings, and the shareholder distributions are called dividends. Contributions and paid-in capital are monies that…...

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