The total equity investment of stockholders in a corporation may be referred to as the net worth of the business. Stockholders’ equity can be found on a corporation’s balance sheet. Stockholders’ equity can be calculated by adding a company’s assets and subtracting the obligations placed on the business by creditors and lenders. A corporation’s stockholders’ equity account may increase when investors put more cash in the business and by reinvesting the company’s net income.
Add all of the corporation’s assets. An asset is a resource controlled by the business that holds a future economic value. Assets consist of items like property, equipment, land, cash and accounts receivable. For instance, a company that has $10,000 cash, $7,000 in accounts receivable, $5,000 in equipment and $1,000 in supplies has total assets of $23,000.
Compute all of the corporation’s liabilities. A liability is an obligation placed on a corporation’s resources. Liabilities consist of items like accounts and notes payable, unearned revenue, wages payable, taxes payable and interest payable. Let’s assume a corporation has $6,000 in accounts payable, $5,000 in notes payable, unearned revenue of $3,500 and taxes payable of $1,000. In this case, the corporation’s total liabilities equal $15,500.
Subtract the corporation’s total liabilities from total assets. For instance, a company that has assets totaling $50,000 and liabilities of $31,000 has stockholders’ equity of $19,000.
Christopher Carter loves writing business, health and sports articles. He enjoys finding ways to communicate important information in a meaningful way to others. Carter earned his Bachelor of Science in accounting from Eastern Illinois University.