Stockholders’ Equity

Assets are financed both by debt and equity. Equity represents the net assets of a corporation. This concept can be compared to owning a house (asset) with an outstanding mortgage note (liability). If the house is valued at $200,000 and the payoff on the mortgage note is $140,000, then the equity in the house is $60,000. A company’s balance sheet is viewed in much the same way. It is composed of many assets, a variety of liabilities, and a resid- ual interest (equity) in those assets. The relationship between the three defines the balance sheet equation.

Furthermore, there continues to exist an inverse relationship between a company’s debt and its equity. If equity increases relative to total assets, then debt decreases proportionally. The greater the equity component in a balance sheet, the less pressadam and eve sex toy adult sex toys lovense sex toy nike air jordan black and white shop nfl jerseys cheap nfl jersey glueless wigs Bengals jerseys nike air max 97 womens hockey jersey customizer cheap wigs that look real jordan 4 black cat custom jerseys braided wigs nike air jordan black and whiteure on the organization to cover related interest costs and generate a profit. Stockholders’ equity is generally divided into two cate- gories: contributed capital and earned capital.