How do I calculate shareholder equity?

Shareholder equity (SE), or stockholders’ equity, calculates the residual value of a company’s assets after settling all its liabilities (debts). A higher shareholder equity indicates a company’s financial strength and stability.

To calculate shareholder equity, subtract total liabilities from total assets of the company:

Here’s a detailed breakdown:

• Total assets represent everything a company owns, including cash and cash equivalents, accounts receivable, inventory, etc.
• Total liabilities represent all the money a company owes, including accounts payable, debts, accrued expenses, etc.

EXAMPLE
Let’s assume a company’s balance sheet shows $1,000,000 of total assets and $500,000 of total liabilities. After subtraction, you’ll see that the company’s shareholder equity is $500,000.