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How to Calculate Stockholders Equity.
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How to Calculate Stockholders Equity.

Rosemary Njeri

Stockholders’ equity or shareholders’ equity, is the remaining amount of assets after all liabilities have been paid.

Stockholders’ equity is useful as it is a means of judging the funds retained within a business. For instance, if it is a negative, it may indicate an oncoming bankruptcy.

Formula to calculate stockholders’ equity.

Calculate Stockholders' Equity.

An asset is a resource with economic value that an individual or country owns or controls with the expectation that it will provide a future benefit.

A liability is something a person or company owes, usually a sum of money.

Example:

At the end of a financial year, a company recorded total assets worth Sh. 80 Million. The company’s total liabilities in that year was Sh. 85 Million. Calculate the shareholders equity.

 Calculate Stockholders' Equity.

Therefore, the stockholders’ equity is a negative of Sh. 5 Million. This shows that if the company’s management don’t come up with a way to either increase the assets or decrease the liabilities, the company could go bankrupt.

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