how is shareholder equity calculated 
shareholder equity is the difference between a firm s total assets and total liabilities this equation is known as a balance sheet equation because all of the relevant information can be gleaned from the balance sheet take the equity at the onset of the accounting period add or subtract any equity infusions such as adding cash from shares issued or subtracting cash used for treasury purchases add net income subtract all cash dividends paid out and any net losses and what you have left is the shareholder equity for that period the bottom linethere s a cautionary line that appears in every financial prospectus past returns are no guarantee of future performance successful investors look well beyond today s stock price or this year s price movement when they consider whether to buy or sell shareholder equity is one of the important numbers embedded in the financial reports of public companies that can help investors come to a sound conclusion about the real value of a company 