What is Common Equity?
Common equity is one component of the overall equity of the shares of common stock issued by a given corporation. The equity will focus on the number of common shares that are currently in the possession of stockholders, as well as any shares currently available on the market. Calculating common equity allows financial analysts to go beyond the broad calculation of shareholders’ equity and obtain a more precise view of the financial stability of the corporation. The formula for arriving at the common equity is relatively simple. First, the total sale of common stock in circulation is determined. This is coupled with the total of retained earnings. Together, this helps to arrive at the amount of capital surplus generated by the common stock and thus the overall value for the stock during the current period. For a quick calculation, many analysts will simply take the current figure of shareholder’s equity and subtract the amount of preferred equity. When all is in order, this figure shou
