Company equity, or shareholders' equity, is calculated by subtracting the company's total liabilities from its total assets. Company equity is used in fundamental analysis to determine its net worth and the amount of funds that are left to shareholders after all the company's debts are paid.
How to Calculate Company Equity
A company's total assets are its total current assets and total long-term assets. Its total liabilities are total current liabilities and total long-term liabilities. To calculate company equity, add the values for the total current assets and long-term assets. Then, subtract the values of total current liabilities and long-term liabilities.
An alternative calculation of company equity is the value of share capital and retained earnings less the value of treasury shares.
For example, as of Sept. 27, 2014, Apple Incorporated has total current assets of $68.531 billion and long-term assets of $163.308 billion. Therefore, Apple has total assets of $231.839 billion.
Apple has total current liabilities of $63.448 billion and long-term liabilities of $56.844 billion. Apple Incorporated has total liabilities of $120.292 billion.
To calculate Apple's equity, subtract its total liabilities from its total assets. Apple has equity of $111.547 billion, or $231.839 billion less $120.292 billion. Apple has $120.292 billion of financing through common and preferred shares.
Google Incorporated, a competitor of Apple, has total assets of $125.781 billion and total liabilities of $26.966 billion for the period ending Sept. 30, 2014. Google has equity of $98.815 billion, or $125.781 billion less $26.996 billion. Google has $98.815 billion of financing through common and preferred shares.