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Shareholder Equity vs Net Worth | Top Differences You Must Know! - YouTube
Channel: WallStreetMojo
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hello everyone hi welcome to the channel
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clicking the bell icon friends today we are to learn a concept which is shareholders
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equity versus the net worth we are going
to understand this topic in a detailed
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format let's try and understand this now
at the very initial end the difference
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between the shareholders equity and the
network is it's so slight that you know
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we don't even notice but there is a
difference between the shareholders
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equity network so when we talk about the
shareholders equity you know what we
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look at at a company and more
specifically a company's balance sheet
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there are three main components of
balance sheet the first one is the
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assets the second one is the liabilities
third one is the shareholders equity
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this other three main component the
shareholders equity this the third part
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can also be expressed as the difference
between the total assets less the total
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liabilities now so let's see the firm
has the total assets that is standing at
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1,00,000 it is standing at 1,00,000 and
the total heavily standing at
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70000 so the shareholders equity will
be standing at 30000 as
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impressive now the question is what
shareholders equity includes see
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shareholders equity it considers equity
portion the share the equity share
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capital or I will say es it includes the
preference share capital that is the PSC
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they both are the Par value and the
additional bit it also includes your
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retained earnings earnings that are not
paid out to the shareholders as a
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dividend and the reason we confuse the
net worth with the shareholders equity
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is because you know even net worth can
be calculated by deducting the total
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liabilities minus the total assets but
there is one slight difference between
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the shareholders equity in the network
when we talk about the net worth we mean
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individual entity and when we talk about
shareholders equity we mean to talk
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about the whole firm so shareholders
equity this is a minor difference
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between the network and the shareholders
equity over here it's about the whole
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company as a whole and over here is an
individual Act
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so how would you understand the
difference between the shareholders
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equity and the network see turns out
that there is a way we look at it and
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the next portion well we'll start with
the shareholders equity was his net
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worth the differences with the help of
the infographics well let's discuss the
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first and the foremost is gonna be the
meaning shareholders equity can be defined
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as the statement of the organization
that includes your equity preferred
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capital the retained earnings and the
results that's what we just discussed a
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couple of minutes back now the net worth
is how much a company and individual has
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after paying off its liabilities it's again you
can say that it's your assets minus the
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liability talking on the next difference
term is the term shareholders equity has
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a definite meaning this is more of a
generic in term that is a sort of a
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difference over here now what is it
related to shareholders equity is
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relevant when the company has multiple
owners multiple owners means share
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capital there is a equity share capital a
preferences share capital Aesop's there is the
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employee stock of those kind of
different multiple owners our net worth
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is relevant when we are only talking
about an individual or a company that
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has no separate identity from his or her
organization so in other terms no other
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owners to claim the profits we are
talking from the individual company that
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has no separate identity audits let's
discuss the equation shareholders as equity
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shareholders us equity can be calculated in two particular ways the first way is to
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deduct the total liabilities of the
company classics let's try and input
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those data here the first way to
calculate the shareholders equity stood
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at our assets less the liabilities and the
second way is to add up all the equity
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and preferred capital resolves and
retained earnings the second way is to
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is like the equity share capital plus your
PLC you need to add up any retained
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earnings and your asserve
net worth calculation net worth is quite
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similar to the shareholders equity here
we need to pay heat to the difference
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between the assets in the liabilities so
for net worth the calculation will be
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your assets less your liabilities so net
worth it's gonna be just assets minus
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the elaborate now how do we look at the
difference
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shareholders is equity when we look at the difference between the total assets and
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the total ability in terms of the
shareholder it would be the
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concentration that will eventually
maximize the value of the shareholders
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it will eventually maximize the
shareholders value if we talk about net
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worth when we look at the difference
between the total assets and the total
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liabilities in terms the net worth we
know that it's what the individual can
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keep all the firm can keep invested well
after discussing all the differences
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there are some of the key differences
that one should know very well the
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shareholders equity and net worth now
the shareholders equity is a specific
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term that describes you know how much
the owners have after paying of their
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total liabilities on the other hand the
net worth is a generic term that
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describes what a company or individual
can keep after paying off its lam when
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we talk about the shareholders equity
they there are owners other than the
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person who has founded the company and
when we talk about the net worth there
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is only you can say 1% there's
only 1% or few and there are no
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other owners claiming the money after
paying off its debt the shareholders
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equity can be described as a sum total
of the equity and equity capital
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preferential capital that's what we
learned retain earning while the network
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net worth on the other hand is the money
that one can keep or reinvested for the
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building of or building the business
forth even if the concept of both of
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this is similar it has a difference even
if the concept of both of this is
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similar it has difference in the context
and in terms of the shareholders equity
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we are looking at the difference between
the total assets and liability as a
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capital for the company on the other
hand in terms of the net worth we are
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looking at the different difference that
actually isn't so finally after
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discussion on all of this the difference
is I can make a conclusion on this in
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general there is no difference between
the shoulders equity and net worth it's
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just because if the difference between
the total assets and liability don't
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match the shareholders doesn't match
with the shareholders equity then there is
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certainly an error in the balance sheet
however you know there is a difference
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in the context on how we understand the
shareholders equity and net worth
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net worth
that you know when a person has some
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assets left after paying of its liabilities
any sort of debts that are present in
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their balance sheet but for a company it
shows how much the owners investment are
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untouched after paying of its store so
that's it for shown as equity in network
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so that's it for this particular topic
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