What is on a statement of stockholder's equity?

Question

How can the information on the stockholder's equity statement be used for management and investor decision making? What are a couple of examples of situations in which the stockholder equity information might be used?

Answer 1

The Statement of Stockholders' Equity is included in the annual report presenting the individual components of Stockholders' Equity and the changes therein during the last year. The major elements of stockholders' equity include capital stock, paid-in capital, retained earnings, treasury stock, unrealized loss on long-term investments, and foreign currency translation gains and losses. The statement is important for capital structure decisions: How much should the firm borrow, and how much of its activities should be financed through various forms of equity? It is also important to evaluate CEO compensation, because the CEO is hired by shareholders, and her compensation depends on how well the various equity portions performed.