Assets are a company’s resources it uses in its business. Liabilities are amounts a company owes to others. Stockholders’ equity is the accounting value of stockholders’ stake in the company and equals total assets minus total liabilities. A company reports assets, liabilities and stockholders’ equity on its balance sheet. A change in assets and liabilities changes the amount of stockholders’ equity. If you know a company’s assets and liabilities and the amounts by which they increase, you can determine the new amount of stockholders’ equity.
Find a public company’s balance sheet in either its 10-Q quarterly report or in its 10-K annual report. You can download these reports from the investor relations section of a company’s website or from the U.S. Securities and Exchange Commission’s online EDGAR database.
Identify the amounts of total assets and total liabilities, listed on the balance sheet. For example, assume a company has $500,000 in total assets and $100,000 in total liabilities.
Determine the known amounts by which the company’s total assets and total liabilities increased. In this example, assume total assets increased by $100,000 and total liabilities increased by $150,000.
Add the increase in total assets to the amount of total assets from the balance sheet to determine the new amount of total assets. Also, add the increase in liabilities to the total liabilities from the balance sheet to determine the new amount of total liabilities. In this example, add $100,000 to $500,000 to get a new amount of total assets of $600,000. Add $150,000 to $100,000 to get a new amount of total liabilities of $250,000.
Subtract the new amount of total liabilities from the new amount of total assets to determine the new amount of total stockholders’ equity. Concluding the example, subtract $250,000 from $600,000 to get $350,000 in total stockholders’ equity.
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