Statement of shareholders' equity.
In plain English
The statement of shareholders' equity starts with beginning equity, adds net income and stock issued, subtracts dividends, buybacks, and losses, and ends with closing equity. It ties the income statement to the balance sheet by showing where profit went: retained in the business or returned to owners. Common lines include common stock, additional paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Reading it tells you whether equity grew because the business earned money or because the company sold more shares. Those two look identical on the balance sheet and mean very different things for existing owners.
01Why it matters
If you own shares, this is where you see whether your slice of the company got bigger from profits or smaller from new shares being issued to someone else.
02The math, step by step
Say equity opens at 1,000,000 dollars, net income is 120,000 dollars, dividends are 40,000 dollars, and no shares are issued. Closing equity is 1,080,000 dollars (1,000,000 plus 120,000 minus 40,000). If instead the company issued 200,000 dollars of new stock and earned nothing, equity also rises, but no value was created.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
The balance sheet shows the equity balance on one date. This statement shows the movement between two dates and names each cause. The balance sheet tells you the equity is 1,080,000 dollars. This one tells you whether that came from earnings, share sales, or a buyback.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.
Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice