The first line item is “Common Stock and Additional Paid-In Capital (APIC)”.Ĭommon stock refers to equity capital issued in the past, recorded at the par value of the shares (the value of a single common share as set by a corporation), while the APIC section is related to the extra capital paid in excess of the par value of common stock issued.ĪPIC increases when a company decides to issue more shares (e.g. Next, we’ll walk through the main parts that make up the equity section on the balance sheet.
Book Value of Equity Line Items Common Stock & Additional Paid-In Capital (APIC) If the company were to be liquidated and subsequently paid off all of its liabilities, the amount remaining for common shareholders would be worth $20mm. The book value of equity will be calculated by subtracting the $40mm in liabilities from the $60mm in assets, or $20mm. The formula for the book value of equity is equal to the difference between a company’s total assets and total liabilities:īook Value of Equity = Total Assets – Total Liabilitiesįor example, let’s suppose that a company has a total asset balance of $60mm and total liabilities of $40mm. In theory, the book value of equity should represent the amount of value remaining for common shareholders if all of the company’s assets were to be sold to pay off existing debt obligations. the company’s financial statements, and in particular, the balance sheet). To calculate the book value of equity of a company, the first step is to collect the required balance sheet data from the company’s latest financial reports such as its 10-K or 10-Q.Īs implied by the name, the “book” value of equity represents the value of a company’s equity according to its books (i.e. The book value of equity, or “Shareholders’ Equity”, is the amount of cash remaining once a company’s assets have been sold off and if existing liabilities were paid down with the sale proceeds.