What Is Stockholder Equity?

• Equity is an accounting term for ownership, hence stockholder equity refers to the total value of stockholder ownership. Equity can be the value of non-liquid assets (such as real estate, equipment and intellectual property) above and beyond liabilities or it can refer to after-tax cash profits.
  
  

Where Is Stockholder Equity?

• A corporate balance sheet lists assets, then liabilities, then stockholder equity. Stockholder equity is the final section on a balance sheet, as it depends on assets in relation to liabilities. Entries on balance sheets go from most liquid (convertible to cash) to less liquid, and the equity accounting starts with preferred stock equity, then common stock, then par value. It deducts retained earnings and lists any treasury stock (stock kept by the company).
  
  

What Happens to Stockholder Equity?

• When a corporation issues quarterly reports, it updates the balance sheet and the tally of stockholder equity. Liquid assets not in use by the company -- profits -- go into separate accounts called capital accounts. From the capital accounts, a corporation pays out dividends to stockholders, buys stock back on the market (which increases the value of remaining stock) or retains earnings.
  
  

What Responsibilities Does Equity Carry?

• As owners, stockholders have some responsibility in the company. However, only a corporation can have stockholders, and corporate structures shield stockholders from complete responsibility. Stockholders are only liable for their investments. In other words, if a company goes bankrupt or is sued, creditors and claimants can lay claim to assets and value in equity (stockholder investment), and stockholders stand to lose all money put into the stock of the company. However, creditors and claimants cannot hold stockholders accountable for anything else or try to take any stockholder assets not associated with the particular company.