what is shareholder equity se 
shareholder equity se is a company s net worth and it is equal to the total dollar amount that would be returned to the shareholders if the company must be liquidated and all its debts are paid off thus shareholder equity is equal to a company s total assets minus its total liabilities se is a number that stock investors and analysts look at when they re evaluating a company s overall financial health it helps them to judge the quality of the company s financial ratios providing them with the tools to make better investment decisions retained earnings are part of shareholder equity as is any capital invested in the company investopedia jake shiunderstanding shareholder equity se shareholder equity represents the total amount of capital in a company that is directly linked to its owners that is it is the dollar value of the company to its owners if the company ever needs to be liquidated se is the amount of money that would be returned to these owners after all other debts are satisfied all the information needed to compute a company s shareholder equity is available on its balance sheet you can figure out the total se of a company using the following formula s h a r e h o l d e r e q u i t y t o t a l a s s e t s t o t a l l i a b i l i t i e s shareholder equity total assets total liabilities shareholderequity totalassets totalliabilitiesthis formula is also known as the accounting equation or the balance sheet equation the balance sheet holds the data needed for the accounting equation so the steps to calculate shareholder equity are as follows current and long term assetstotal assets include current and noncurrent assets current assets include cash and anything that can be converted to cash within a year such as accounts receivable and inventory long term assets are possessions that cannot reliably be converted to cash or consumed within a year they include investments property plant and equipment ppe and intangibles such as patents current and long term liabilitiestotal liabilities consist of current and long term liabilities current liabilities are debts typically due for repayment within one year this includes accounts payable ap and any outstanding taxes long term liabilities are obligations that are due for repayment over periods longer than one year companies may have bonds payable leases and pension obligations under this category positive vs negative shareholder equityse can be either negative or positive negative se means a company s liabilities exceed its assets if it s positive the company has enough assets to cover its liabilities if a company s shareholder equity remains negative it is considered to be balance sheet insolvency retained earnings are part of shareholder equity this is the percentage of net earnings that is not paid to shareholders as dividends retained earnings should not be confused with cash or other liquid assets the retained earnings are used primarily for the expenses of doing business and for the expansion of the business moreover liquidation value is not the same as shareholder equity during a liquidation process the value of physical assets is reduced and there are other extraordinary conditions that make the two numbers incompatible many investors view companies with negative shareholder equity as risky or unsafe investments but shareholder equity alone is not a definitive indicator of a company s financial health if used in conjunction with other tools and metrics the investor can accurately analyze the health of an organization the number of shares issued and outstanding is a more relevant measure than shareholder equity for certain purposes such as dividends and earnings per share eps this measure excludes treasury shares which are stock shares owned by the company itself examples of shareholder equityhere s a hypothetical example to show how shareholder equity works let s assume that abc company has total assets of 2 6 million and total liabilities of 920 000 in this case abc company s shareholder equity is 1 68 million now let s take a look at a few real world examples notably the world s two largest soft drink companies 