Final answer:
Shareholder's equity consists of amounts contributed by shareholders and amounts retained by the corporation.
Step-by-step explanation:
Shareholder's equity
consists of:
- Amounts contributed by shareholders
- Amounts retained by the corporation
Shareholders contribute funds to a corporation by purchasing stock, which represents ownership in the company. The company can also retain earnings instead of distributing them to shareholders as dividends, which adds to the corporation's equity.
Shareholder's equity consists of amounts invested by shareholders and amounts earned by the corporation. Shareholders are people who own at least some shares of stock in a firm, and the equity represents their claim on the company's assets after all liabilities have been paid.
Companies can raise financial capital from shareholders' investments, which can be used to fund operations, growth, and expansion. Any profits that are not distributed back to the shareholders as dividends are often reinvested into the business, which can increase the value of the shareholders' equity over time.