Equity Examples

Article byWallstreetmojo Team
Edited byPallabi Banerjee
Reviewed byDheeraj Vaidya, CFA, FRM

What Are Equity Examples?

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


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The equity value is a critical metric to understand a company’s or firm’s financial position 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 insolvencyInsolvencyInsolvency is when the company fails to fulfill its financial obligations like debt repayment or inability to pay off the current liabilities. Such financial distress usually occurs when the entity runs into a loss or cannot generate sufficient cash flow.read more.

Equity Examples Explained

The term equity examples refer to the various options that signify ownership interest in the business operations of an asset, property, or organization. The examples of such ownership can be varied and similarly, the asset can also vary based on the type of organization and business objective. Owners equity examples is a very critical and useful financial concept.

They can be in different forms, as given in the list below. It shows or evaluates gains and losses based on fluctuations in the asset valuation.

Most common shareholders’ equity examples include the following –

  1. Common StockCommon StockCommon stocks are the number of shares of a company and are found in the balance sheet. It is calculated by subtracting retained earnings from total equity.read more – Common stock represents the total number of shares multiplied by its par value.
  2. Preferred StockPreferred StockA preferred share is a share that enjoys priority in receiving dividends compared to common stock. The dividend rate can be fixed or floating depending upon the terms of the issue. Also, preferred stockholders generally do not enjoy voting rights. However, their claims are discharged before the shares of common stockholders at the time of liquidation.read more – Preferred stock is similar to common stock. However, they get precedence in dividend payments.
  3. Additional Paid-in CapitalAdditional Paid-in CapitalAdditional paid-in capital or capital surplus is the company's excess amount received over and above the par value of shares from the investors during an IPO. It is the profit a company gets when it issues the stock for the first time in the open market.read more – This is the amount over par value contributed by the shareholders and is an important concept in the owners equity examples.
  4. Treasury StockTreasury StockTreasury Stock is a stock repurchased by the issuance Company from its current shareholders that remains non-retired. Moreover, it is not considered while calculating the Company’s Earnings Per Share or dividends. read more – Treasury stock shares that the company has reacquired from the shareholders;
  5. Accumulated Other Comprehensive Income / Loss- This includes the gains and losses excluded from the income statement and reported below the net income.
  6. Retained EarningsRetained EarningsRetained Earnings are defined as the cumulative earnings earned by the company till the date after adjusting for the distribution of the dividend or the other distributions to the investors of the company. It is shown as the part of owner’s equity in the liability side of the balance sheet of the company.read more – The portion of the income 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 either shareholder’s equity or stockholders equity examples. For a proprietorship, it is known as owner’s equity.

In the article below, we will find some the calculation examples of Shareholders’ EquityShareholders EquityShareholder’s equity is the residual interest of the shareholders in the company and is calculated as the difference between Assets and Liabilities. The Shareholders' Equity Statement on the balance sheet details the change in the value of shareholder's equity from the beginning to the end of an accounting period.read more.

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

Example #1

XYZ Ltd is a company that is engaged in the manufacturing of industrial paints. Recently the annual reportThe Annual ReportAn annual report is a document that a corporation publishes for its internal and external stakeholders to describe the company's performance, financial information, and disclosures related to its operations. Over time, these reports have become legal and regulatory requirements.read more 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 of December 31, 2018.

Given, Total Assets = Cash & Cash equivalent + Accounts receivableAccounts ReceivableAccounts receivables is the money owed to a business by clients for which the business has given services or delivered a product but has not yet collected payment. They are categorized as current assets on the balance sheet as the payments expected within a year. read more + Net property, plant & equipment + Inventory

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

Total Assets = $51,500,000

Again, Total liabilities = Total long term debtTotal Long Term DebtLong-term debt is the debt taken by the company that gets due or is payable after one year on the date of the balance sheet. It is recorded on the liabilities side of the company's balance sheet as the non-current liability.read more + Total short term debt + Accounts payableAccounts PayableAccounts payable is the amount due by a business to its suppliers or vendors for the purchase of products or services. It is categorized as current liabilities on the balance sheet and must be satisfied within an accounting period.read more + Other current liabilities

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

Total liabilities = $11,000,000

Therefore, the equity examples accounting of XYZ Ltd can be calculated using the below formula as,

Equity Example 1.1

= $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 of December 31, 2018. A healthy positive equity value indicates a strong financial position of the company that confirms its going concernGoing ConcernAny analyst analyzing a company will be left to a basic assumption that the company does not go bankrupt or file a chapter 11 bankruptcy. This basic assumption allows the analyst to think that there is no immediate danger to the company. The company can operate until infinity is called the principle of going concern.read more.

Example #2

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

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,

Example 2

= $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 of December 31, 2018. This negative equityNegative EquityA negative equity balance is one in which the liabilities in shareholder's equity exceed the assets for reasons such as accumulated losses over years, high dividend payments, borrowing money instead of issuing new shares to cover accumulated losses, and amortization of intangibles.read more value indicates a very weak financial position which may be close to bankruptcy or winding up.

Example #3

Let us now take the example of a real company – Apple Inc. and understand the equity examples accounting. 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 + Marketable securitiesMarketable SecuritiesMarketable securities are liquid assets that can be converted into cash quickly and are classified as current assets on a company's balance sheet. Commercial Paper, Treasury notes, and other money market instruments are included in it.read more + 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 + Commercial paperCommercial PaperCommercial Paper is a money market instrument that is used to obtain short-term funding and is often issued by investment-grade banks and corporations in the form of a promissory note.read more + 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:

Ex 3

= $365,725 Mn – $258,578 Mn

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

Therefore, Apple Inc.’s stockholder’s equity, as of 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 computer accessories business in the US. As per the balance sheetBalance SheetA balance sheet is one of the financial statements of a company that presents the shareholders' equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner's capital equals the total assets of the company.read more 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 instead of shareholders 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

Again, Total liabilities = Net debtNet DebtDebt minus cash and cash equivalents equals net debt, which is the amount of debt a company has in comparison to its liquid assets. It is a metric that is used to evaluate a firm's financial liquidity and aids in determining if the company can meet its obligations by comparing liquid assets to total debt.read more + Accounts payable + Other current liabilities

= $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,

Ex 4

= $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.

The above equity examples in business give us a very good idea about the calculation of equity using data and financial information taken from the financial statements of companies. The companies are from different sectors, and are of different scale of operation, from small business to multinational enterprises.

Equity Examples Vs Equality Examples

The above are two different concepts and deal with completely different situations. Some points highlighted below will explain the basic differences of the two.

  • The former deals with ownership rights or interests in various forms of assets whereas the latter deals with equal distribution of various services.
  • The equity examples in business deals with assets like various forms of stocks which may includes preferred shares, common shares or retained earnings, which are the part of profits kept aside for use in the business, etc. But the latter deals with equality in accessing different opportunities related to the basic amenities in life like the food, clothing and shelter, equality in the workplace , equal rights to health benefits, etc.
  • The former seeks to provide the details about the share of the owners in the business or the interest of investors in the share capital whereas the latter strives to give equal treatment or sameness in every sphere of the society and eliminate any disparity of opportunity.

Thus, the above points clarify the basic differences between the two concepts.

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This article has been a guide to what are Equity Examples. We explain them with a few examples and the differences with equality examples. You may learn more about accounting from the following articles –

Reader Interactions


  1. Jolayemi Sunday olumide says

    This explanation really opened my understanding about equity. Thanks you.

    • Dheeraj Vaidya says

      Thanks for your kind words!