A measure of an entity’s equity that is calculated as the difference between its total assets and total liabilities:
Total equity = total assets – total liabilities
By composition, total equity consists of all shares of stock issued (paid-in capital), plus additional paid-in capital, reserves and retained earnings, minus any own stock repurchases (treasury stock).
In other words, total equity is:
Total equity = common stock + preferred Stock + additional paid-in capital +reserves + retained earnings – treasury stock
The proportion of reserves relating (attributable) to equity holders is part of total equity, while reserves attributable to other stakeholders are not.
Total equity is one of the two main sources of long-term capital for an entity, the other being long-term debt.
Total equity approximately represents the break-up value of the entity.
