Shareholder’s equity refers to the total amount of capital that has been contributed by the owners (shareholders) of a company, plus any retained earnings or profits that have been reinvested in the business. It represents the net worth of the company and is shown on the balance sheet as a component of the company’s total assets.
Shareholder’s equity is important because it indicates the financial health and stability of a company and is a key factor in determining its valuation. Shareholder’s equity also represents the amount of funds that would be available to shareholders if the company were to be liquidated.