Final answer:
Shareholder equity consists of Share Capital and Retained Earnings, which represent the total shareholder investment and undistributed profits of a company respectively.
Step-by-step explanation:
The components of shareholder equity are Share Capital and Retained Earnings. Thus, the correct answer to the question is option C. Share Capital represents the money that shareholders invest directly in the company through the purchase of stock, and Retained Earnings refer to the accumulated profits that a company reinvests in itself rather than distributing as dividends. Shareholder liability is limited to the amount they have invested. The ability to sell stock can finance company growth. When using a T-account to represent a firm's finances, shareholder equity would be part of the net worth on the liabilities side, with total assets on one side of the 'T' and liabilities plus net worth on the other to ensure the account balances.