A company’s stockholders’ equity is the total value of stockholders’ interest in the company, which consists of paid-in capital and retained earnings. Paid-in capital, or contributed capital, is the total amount of money that preferred stockholders and common stockholders have contributed to the company by buying shares of stock. The amount of retained earnings is the total profits a company has kept that it has not paid as dividends. Paid-in capital will typically make up more of a younger company’s stockholders’ equity than that of an older company, which has generated earnings for many years.
1. Find a company’s balance sheet in its 10-K annual report. You can obtain this report from the investor relations section of its website or from the U.S. Securities and Exchange Commission’s EDGAR online database.
2. Identify, in the stockholders’ equity section, the amounts of total stockholders’ equity, retained earnings and treasury stock. A balance sheet shows the amount of treasury stock, which is a company’s own stock that it has repurchased from investors, enclosed in parentheses to designate that it reduces stockholders’ equity. For example, assume a company has $100,000 in total stockholders’ equity, $60,000 in retained earnings and $20,000 in treasury stock.
3. Substitute the values into the paid-in capital formula: stockholders’ equity minus retained earnings plus treasury stock. In this example, substitute the values to get the formula: $100,000 minus $60,000 plus $20,000.
4. Subtract retained earnings from total stockholders’ equity. In this example, subtract $60,000 from $100,000 to get $40,000.
5. Add treasury stock to your result to calculate total paid-in capital. In this example, add $40,000 and $20,000 to get $60,000 in total paid-in capital.