Owners’ equity

Sometimes this is referred to as stockholders’ equity. Owners’ equity is made up of the initial investment in the business as well as any retained earnings that are reinvested in the business.

  • Common stock
    This is stock issued as part of the initial or later-stage investment in the business.

  • Retained earnings
    These are earnings reinvested in the business after the deduction of any distributions to shareholders, such as dividend payments.

  • Total liabilities and owners’ equity
    This comprises all debts and monies that are owed to outside creditors, vendors, or banks and the remaining monies that are owed to shareholders, including retained earnings reinvested in the business.