Shareholders' equity can be calculated by subtracting a company's total liabilities from its total assets, both of which are itemized on the company's balance sheet.
The balance sheet method In particular, the common stock line of the balance sheet will typically have a number that equals the par value of each share multiplied by the number of shares issued. Therefore, if you have the balance sheet entry and the par value, you can calculate the issued share count.
Shareholders' Equity = Total Assets – Total Liabilities Take the sum of all assets in the balance sheet and deduct the value of all liabilities.
Shareholders' Equity = Share Capital + Retained Earnings – Treasury Stock. The share capital method is sometimes known as the investor's equation. The above formula sums the retained earnings of the business and the share capital and subtracts the treasury shares.
Earnings per share (EPS) is calculated by subtracting preferred dividends from a company's net income and dividing the result by the total number of common shares.
Average shareholder equity takes the shareholder equity from a number of consecutive periods and averages them. Look at financial statements for two or more consecutive periods and find shareholder equity under "Liabilities and Equity." Add the figures together and divide by the number of statements.
The balance sheet provides the values needed in the equity equation: Total Equity = Total Assets - Total Liabilities.
How to prepare a statement of owner's equity Step 1: Gather the needed information. Step 2: Prepare the heading. Step 3: Capital at the beginning of the period. Step 4: Add additional contributions. Step 5: Add net income. Step 6: Deduct owner's withdrawals. Step 7: Compute for the ending capital balance.