what can shareholder equity tell you 
savvy investors look beyond today s market prices when they consider buying or selling stock shareholder equity helps them determine the real return that a company is generating for its investors versus the total amount that those investors have paid for its stock for example a ratio like return on equity roe which is a company s net income divided by its shareholder equity is used to measure how well a company s management is using its equity from investors to generate profits positive shareholder equity means the company has enough assets to cover its liabilities negative shareholder equity means that the company s liabilities exceed its assets 