Shareholders’ Equity is the residual interest in the assets of an entity that remains after deducting liabilities.
Shareholders’ equity includes:
- Common stock: This is the amount contributed by common shareholders.
- Preferred stock: Preferred stock is a hybrid form of financing, sharing some features with debt and some with common equity. It pays the preferred stockholder a fixed, agreed-upon dividend at regular intervals.
- Treasury stock: These are the shares that a company has issued and later reacquired. Purchasing treasury stock decreases assets and stockholders’ equity
- Retained earnings: This refers to the income that has been retained in the business (that is, not paid out in dividends to stockholders) over life of business.
- Non-controlling interest (Minority interest): A minority investment or a minority interest refers to the non-controlling share in a company held by an investor or another company. For example, a private equity firm may have a non-controlling share in a company. The minority investment is usually less than 50% of the total outstanding shares of the company.
- Accumulative other comprehensive income: This reflects the changes in a company’s equity during the accounting period other than net income and contributions by or distributions to the company’s owners.