why is common stock called an equity 
common stock represents a residual ownership stake in a company the right to claim any other corporate assets after all other financial obligations have been met a company maintains a balance sheet composed of assets and liabilities assets include what the company owns or is owed such as its property equipment cash reserves and accounts receivable on the other side of the ledger are liabilities which are what the company owes these include payables debts and other obligations if a company is healthy the total assets will be larger than the total liabilities the residual amount left to the owners is known as shareholders equity and is represented by a company s shares 