Question
Shareholders' equity is composed of several components that contribute to a company's net worth. These include common stock, which represents the initial contributions of shareholders; paid-in capital, which are additional investments made by shareholders beyond the par value of the stock; and retained earnings, which are the accumulated earnings not distributed as dividends. These components collectively represent the net worth attributable to the shareholders. They contribute to a company's net worth by providing capital for the company to use for operations, growth, and debt repayment. The total assets of a company are equal to the total liabilities and equity, which means shareholders' equity is a critical part of a company's overall financial health.
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This brings us to the final part of the equation: shareholders' equity. This can include common stock, which indicates the initial contributions of shareholders; Paid-in capital, which are additional investments made by shareholders beyond the par value of the stock; and retained earnings, which are the accumulated earnings not distributed as dividends. The equity section is essentially the net worth attributable to the shareholders. Note that for each year, the "Total assets" equal to the "Total liabilities and equity".
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