Common stocks are shares of ownership of public corporations. Prices rise and fall constantly since they are traded on stock markets.
This is the type of stock most people invest in. Holders of common stock elect the board of directors and vote on corporate policies.
Common stock is reported in the stockholder’s equity section of a company’s balance sheet.
Formula to calculate common stock.
Total equity is the value left in the company after subtracting total liabilities from total assets.
Retained earnings is the amount of net income left over for the business after it has paid out dividends to its shareholders .
Example:
A company recorded a total equity of $ 1,000,000 in a certain year. After paying the shareholders their dividends, the amount that was left as retained earnings amounted to $ 50,000. Calculate the companies common stock.
Therefore, the company’s common stock is worth $ 950,000.
