Components of Stockholders' Equity

Concept

Overview

Stockholders' equity (SE) represents the owners' residual interest in the company. SE = Assets − Liabilities. The main components are: Common Stock, Additional Paid-In Capital (APIC), Retained Earnings, Accumulated Other Comprehensive Income (AOCI), and Treasury Stock.

Concept

Par Value vs. Market Value

Par value is an arbitrary legal value assigned to stock, often $1 or $0.01 per share. It has no relation to market value. Additional Paid-In Capital represents the amount received above par value when stock is issued.

Key Point

The Equity Equation

Total SE = Common Stock + APIC + Retained Earnings + AOCI − Treasury Stock. Each component has specific rules for how and when it changes.

Issuing Stock

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