# Equity Examples  ## Examples of Shareholders Equity

Equity is anything that is invested in the company by its owner or the sum of the total assets minus the sum of the total liabilities of the company. E.g., Common stock, additional paid-in capital, preferred stock, retained earnings and the accumulated other comprehensive income.

Most common shareholders equity examples include the following –

For eg:
Source: Equity Examples (wallstreetmojo.com)

1. – Common stock represents the total number of shares multiplied by its par value.
2. Preferred Stock – Preferred stock is similar to common stock. However, they get precedence in dividend payments.
3. – This is the amount over par value contributed by the shareholders
4. – Treasury stock shares that have been reacquired by the company from the shareholders;
5. Accumulated Other Comprehensive Income / Loss- This includes the gains and losses that are excluded from the income statement and reported below the net income.
6. – It is the portion of the income that is retained in the company to invest in the business.

We represent the Equity Formula as:

Equity = Total Assets – Total Liabilities

In the case of a corporation, we call the equity value as either shareholder’s equity or stockholder’s equity. For a proprietorship, it is known as owner’s equity.

### Top 4 Calculation Examples of Shareholders Equity

Let’s see some simple, practical examples of shareholder’s equity to understand it better.

#### Example #1

XYZ Ltd is a company that is engaged in the manufacturing of industrial paints. Recently for the year ending on December 31, 2018, was published. Given below are some excerpts from the balance sheet. Based on the following financial information, determine the shareholder’s equity of XYZ Ltd as on December 31, 2018.

= \$1,000,000 + \$6,000,000 + \$40,000,000 + \$4,500,000

Total Assets = \$51,500,000

= \$3,000,000 + \$1,500,000 + \$4,000,000 + 2,500,000

Total liabilities = \$11,000,000

Therefore, the shareholder’s equity of XYZ Ltd can be calculated using the below formula as,

= \$51,500,000 – \$11,000,000

Shareholder’s Equity of XYZ Ltd = \$40,500,000

Therefore, the shareholder’s equity of XYZ Ltd stood at \$40,500,000 as on 31st December 2018. Healthy positive equity value is an indication of a strong financial position of the company that confirms its going concern.

#### Example #2

Now, let us take the example of ABC Ltd, which is an ice cream manufacturing company. As per the annual report released for the year ending on December 31, 2018, the following information is made available.

Based on the following financial information, determine the shareholder’s equity of ABC Ltd as on December 31, 2018.

Given, Total Assets  = Cash & Cash equivalent + Accounts receivable + Net property, plant & equipment + Inventory

= \$500,000 + \$4,000,000 + \$16,000,000 + \$3,500,000

Total Assets = \$24,000,000

Again, Total liabilities = Total long term debt + Total short term debt + Accounts payable + Other current liabilities

= \$8,000,000 + \$4,500,000 + \$8,000,000 + 5,000,000

Total liabilities = \$25,500,000

Therefore, the shareholder’s equity of ABC Ltd can be calculated using the below formula as,

= \$24,000,000 – \$25,500,000

Shareholder’s Equity of ABC Ltd = – \$1,500,000

Therefore, the shareholder’s equity of ABC Ltd stood at – \$1,500,000 as on 31st December 2018. This negative equity value indicates a very weak financial position which may be close to bankruptcy or wind up.

#### Example #3

Let us now take the example of a real company – Apple Inc. As per the annual report for the period ended on September 29, 2018. As per the publicly released financial data, the following information is available. Based on the information, determine the stockholder’s equity of Apple Inc. as on September 29, 2018.

All amounts in millions

Given, Total assets (in Mn) = Cash and cash equivalents + + Accounts receivable + Inventories + Vendor non-trade receivables + Other current assets + Net property, plant & equipment + Other non-current assets

= \$25,913 + \$2,11,187 + \$23,186 + \$3,956 + \$25,809 + \$12,087 + \$41,304 + \$22,283

Total Assets = \$365,725

Again, Total liabilities (in Mn) = Accounts payable + Other current liabilities + Deferred revenue + + Term debt + Other non-current liabilities

= \$55,888 + \$32,687 + \$10,340 + \$11,964 + \$102,519 + \$45,180

Total liabilities = \$258,578

Therefore, the stockholder’s equity of Apple Inc. as on September 29, 2018 can be calculated as:

= \$365,725 Mn – \$258,578 Mn

Shareholder’s Equity of Apple Inc = \$107,147 Mn

Therefore, Apple Inc.’s stockholder’s equity, as on September 29, 2018, stood at \$107,147 Mn.

#### Example #4

Let us now take the example of a small business owner who is into the business of computer accessories in the US. As per the of the proprietorship firm for the financial year ended on March 31, 2018, the following information is available.Determine the owner’s equity of the firm. [since it has a single owner, as such owner’s equity in lieu of shareholder’s or stockholder’s equity]

Given, Total Assets = Net property, plant & equipment + Warehouse premises + Accounts Receivable + Inventory
= \$900,000 + \$1,100,000 + \$400,000 + \$800,000

Total Assets = \$3,200,000

= \$600,000 + \$700,000 + \$800,000

Total Liabilities = \$2,100,000

Therefore, the owner’s equity of the firm as on March 31, 2018, can be calculated as,

= \$3,200,000 – \$2,100,000

Owner’s Equity = \$1,100,000

Therefore, the owner’s equity of the firm, as on March 31, 2018, stood at \$1,100,000.

### Conclusion

The equity value is a critical metric to understand the financial position of a company or firm on any reporting date. Positive equity with an increasing trend is always a good sign for any company. In contrast, a declining trend in equity value is indicative of weak management and it could be a signal that the company is nearing .

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