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Definition of Stockholder's equity
The residual claims that stockholders have against a firm's assets, calculated by
Balance sheet item that includes the book value of ownership in the corporation. It
The percentage return or profit that management made on each dollar stockholders invested in a company. Hereâ€™s how you figure it:
A ratio that shows which groupâ€”creditors or stockholdersâ€”has the biggest stake in or the most control of a company:
The value of the ownersâ€™ interests in a company.
The total amount of contributed capital and retained earnings; synonymous with shareholdersâ€™ equity.
Although often considered
The discount rate that reflects only the business risks of a project and abstracts from the
The ratio of total assets to stockholder equity.
A management style that de-emphasizes the significance of economic
Value of outstanding common shares at par, plus accumulated retained
These two groups may have interests in a corporation that
Indicator of financial leverage. Compares assets provided by creditors to assets provided
A common term for convertible bonds because of their equity component and the
An international equity placement where the offering is split into two
Represents ownership interest in a firm. Also the residual dollar value of a futures trading account,
An agreement in which one party, for an upfront premium, agrees to compensate the other at
Also called a residual claim, a claim to a share of earnings after debt obligation have been
The simultaneous purchase of an equity floor and sale of an equity cap.
Equity contribution agreement
An agreement to contribute equity to a project under certain specified
An agreement in which one party agrees to pay the other at specific time periods if a specific
Used to refer to warrants because they are usually issued attached to privately placed bonds.
Total assets divided by total common stockholders' equity; the amount of total assets per
Securities that give the holder the right to buy or sell a specified number of shares of stock, at
A swap in which the cash flows that are exchanged are based on the total return on some stock
Related: Variable life
Those holding shares of the firm's equity.
Securities sold in the Euromarket. That is, securities initially sold to investors
Foreign equity market
That portion of the domestic equity market that represents issues floated by foreign companies.
GEMs (growing-equity mortgages)
Mortgages in which annual increases in monthly payments are used to
The balance of a margin account. Related: buying on margin, initial margin requirement.
Stock in a firm that relies on financial leverage. Holders of leveraged equity face the
Long-term debt to equity ratio
A capitalization ratio comparing long-term debt to shareholders' equity.
Preferred equity redemption stock (PERC)
Preferred stock that converts automatically into equity at a
Return on equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12
This is a company's total assets minus total liabilities. A company's net worth is the
Holder of equity shares in a firm.
Set of books kept by firm management for its annual report that follows Financial
Stratified equity indexing
A method of constructing a replicating portfolio in which the stocks in the index
Top-down equity management style
A management style that begins with an assessment of the overall
Total debt to equity ratio
A capitalization ratio comparing current liabilities plus long-term debt to
Funds raised from shareholders.
An account that reduces an equity account. An example is Treasury stock.
Amounts contributed to the company by the owners (contributed capital) plus the residual earnings of the business (retained earnings).
The total amount of contributed capital and retained earnings; synonymous with stockholders' equity.
A widely used financial statement ratio to assess the
Refers to one of the two basic sources of capital for a business, the
Refers to the capital invested in a business by its shareowners
return on equity (ROE)
This key ratio, expressed as a percent, equals net
Cost of Equity
Same as the cost of common stock. Sometimes viewed as the
Return on Common Equity Ratio
A measure of the percentage return earned on the value of the
The difference between the total of all recorded assets and liabilities on the balance
The total of all capital contributions and retained earnings on a businessâ€™s
A person or entity that owns shares in a corporation.
Ownership. Common stock represents equity in a corporation.
Accounting method for an equity security in cases where the investor has sufficient
An ownership interest in an enterprise, including preferred and common stock.
The residual interest or owners' claims on the assets of a corporation
A comparison of debt to equity in a company's capital structure.
The net worth of a business, consisting of capital stock, capital (or paid-in) surplus (or retained earnings), and, occasionally, certain net worth reserves. Common equity is that part of the total net worth belonging to the common shareholders. Total equity includes preferred shareholders. The terms common stock, net worth, and common equity are frequently used interchangeably.
Refers to the investors percentage ownership of a company that can be re-acquired by the company, usually at a pre-determined amount.
Funds, other than paid-up capital and retained earnings, employed in a business and which will remain in a business as permanent capital.
Represents the total assets of a corporation less liabilities.
The net worth of a company. This represents the ownership interest of the shareholders (common and preferred) of a company. For this reason, shares or stocks are often known as equities.
Life insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of an equity portfolio.
Through equity investment, investors gain part ownership of the corporation. The primary type of equity investment is corporate stock.
Balance sheet identity
Total Assets = Total Liabilities + Total stockholders' equity
Book value per share
The ratio of stockholder equity to the average number of common shares. Book value
The makeup of the liabilities and stockholders' equity side of the balance sheet, especially
Common stock ratios
Ratios that are designed to measure the relative claims of stockholders to earnings
The risk that the cash flow of an issuer will not be adequate to meet its financial obligations.
Decisions concerning the liabilities and stockholders' equity side of the firm's balance
Indicator of financial leverage. Shows long-term debt as a proportion of the
Common stockholders' equity which consists of common stock, surplus, and retained earnings.
Compares a stock's market value to the value of total assets less total liabilities (book
Reverse stock split
A proportionate decrease in the number of shares, but not the value of shares of stock
A â€śsnapshotâ€ť statement that freezes a company on a particular day, like the last day of the year, and shows the balances in its asset, liability, and stockholdersâ€™ equity accounts. Itâ€™s governed by the formula:
BOOK VALUE OF COMMON STOCK
The theoretical amount per share that each stockholder would receive if a companyâ€™s assets were sold on the balance sheetâ€™s date. Book value equals:
CASH FLOWS FROM OPERATIONS
A section on the cash-flow stockholdersâ€™ equity statement that shows how much cash came into a company and how much went out during the normal course of business.
a discipline in which historical, monetary
Book value of common stockholdersâ€™ equity plus preferred stock.
Cash Flow Provided or Used from Financing Activities
Cash receipts and payments involving
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