The Common Equity Calculator is a tool used to determine the equity available to common shareholders after accounting for liabilities and preferred equity. It provides valuable insights into a company’s financial position and is essential for evaluating shareholder value, making investment decisions, and assessing overall financial health.
Formula of Common Equity Calculator
The formula for calculating common equity is:
Common_Equity = Total_Assets – Total_Liabilities – Preferred_Equity
Where:
- Common_Equity is the equity available to common shareholders (in currency).
- Total_Assets is the sum of all assets owned by the company.
- Total_Liabilities is the total of all liabilities owed by the company.
- Preferred_Equity is the value of equity allocated to preferred shareholders.
Dependent Variable Formulas
- Total Assets
Total_Assets = Common_Equity + Total_Liabilities + Preferred_Equity - Total Liabilities
Total_Liabilities = Total_Assets – Common_Equity – Preferred_Equity - Preferred Equity
Preferred_Equity = Total_Assets – Total_Liabilities – Common_Equity
Combined Formula
Common_Equity = Total_Assets – (Total_Liabilities + Preferred_Equity)
Useful Conversion Table
| Parameter | Unit | Typical Values/Notes |
|---|---|---|
| Common Equity | Currency | Represents the value available to common shareholders |
| Total Assets | Currency | Includes cash, investments, property, equipment, etc. |
| Total Liabilities | Currency | Includes debts, accounts payable, and obligations |
| Preferred Equity | Currency | Specific equity allocated to preferred shareholders |
Example of Common Equity Calculator
A company has total assets of $500,000, total liabilities of $300,000, and preferred equity of $50,000. Calculate the common equity.
- Calculate Common Equity:
Common_Equity = Total_Assets – Total_Liabilities – Preferred_Equity
Common_Equity = $500,000 – $300,000 – $50,000
Common_Equity = $150,000
The common equity available to shareholders is $150,000.
Most Common FAQs
Common equity represents the residual value available to common shareholders after liabilities and prefer equity are account for. It reflects a company’s financial strength and profitability.
A company can increase common equity by retaining earnings, issuing additional shares of common stock, or reducing liabilities.
Common equity is available to common shareholders and often comes with voting rights. While prefer equity is prioritize in dividends and claims on assets but usually lacks voting rights.