Statement of stockholders’ equity

Definition

A statement of stockholders' equity is a financial document that details the changes in the equity section of a company's balance sheet during an accounting period. It includes information on common stock, retained earnings, and other components of shareholders' equity.

5 Must Know Facts For Your Next Test

1. The statement of stockholders' equity shows how net income, dividends, and other factors affect the ownership interest of shareholders.
2. It provides insight into the company's financial health by highlighting changes in equity over time.
3. Components typically include common stock, additional paid-in capital, retained earnings, and treasury stock.
4. This statement helps investors understand how their investments are being managed and if the company is generating returns or requiring additional financing.
5. Financial forecasting often uses the statement to project future changes in equity based on anticipated performance.

Review Questions

• What are the primary components included in a statement of stockholders’ equity?
• How does net income impact the statement of stockholders’ equity?
• Why is the statement of stockholders’ equity important for financial forecasting?

Related terms

Balance Sheet: A financial statement that provides a snapshot of a company’s assets, liabilities, and equity at a specific point in time.

Retained Earnings: The portion of net income that is retained by the company rather than distributed to its shareholders as dividends.

Treasury Stock: Shares that were issued and later reacquired by the issuing company, reducing total shareholder's equity.