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Can Stockholders' Equity be Negative?
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Total Stockholders' Equity is almost always a positive number, but it is possible for it to be negative. This typically occurs when the company incurs significant losses, which results in a large Accumulated Deficit. However, accumulated other comprehensive losses (past losses that bypassed the Income Statement) and treasury stock (shares the company repurchased) can also reduce Stockholders' Equity and contribute to it being negative.
When Total Stockholders' Equity is negative, it is referred to as Total Deficit. Negative equity typically precedes a bankruptcy (since the company is probably losing a lot of money) but it does not mean the shareholders owe the company money.—
Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education freely available to the world.
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When Total Stockholders' Equity is negative, it is referred to as Total Deficit. Negative equity typically precedes a bankruptcy (since the company is probably losing a lot of money) but it does not mean the shareholders owe the company money.—
Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education freely available to the world.
—
SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS:
• A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING
• A 44-PAGE GUIDE TO U.S. TAXATION
• A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS
• MANY MORE FREE PDF GUIDES AND SPREADSHEETS
—
SUPPORT EDSPIRA ON PATREON
—
GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT
—
LISTEN TO THE SCHEME PODCAST
—
GET TAX TIPS ON TIKTOK
—
ACCESS INDEX OF VIDEOS
—
CONNECT WITH EDSPIRA
—
CONNECT WITH MICHAEL
—
ABOUT EDSPIRA AND ITS CREATOR
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