What is the meaning of "shareholder's funds"?
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What is the meaning of "shareholder's funds"?

A:

Quick Answer

Shareholders' funds is the value of shareholder investment in a particular company, according to Reuters. The accounts of a single company without subsidiaries include assets minus liabilities. Minority interest value is not included for consolidated group accounts.

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Wikipedia mentions that shareholders' funds is also known as shareholder equity. Equity comes in the form of assets that are divided among shareholders. About.com notes that equity originates from two places. The first is cash from the investors when stock is sold by the company, and the second is retained earnings that are not paid to shareholders in the form of dividends. These methods create shareholder equity, and a balance sheet shows every contribution.

Equity is divided according to how many shares an individual holds. This comes in the form of stock that a shareholder paid to gain a stake in the company. However, creditors are always first when accessing assets, and the shareholders are the last people to attain the funds, according to Wikipedia.

There are also times when creditors don't get enough assets to satisfy the debts, which translates into no equity for the shareholders. Because shareholders risk getting zero equity if creditors seize all of the assets, ownership equity is also known as risk capital. However, shareholders are still entitled to equity when a company goes through bankruptcy or liquidation.

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