Why net worth is known as shareholder's equity?



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hi Binny,

Will you please answer following questions?
1.if in non-current liabilities we have loan of say 2000000 and out of that we are going to pay 100000 this year.i.e current liability is 100000. then total liabilities=2000000 or 2100000.
2. why net worth is called as shareholder's equity?
3. what is share capital? is it only promoters investment or both promoters n investors?
4. inventory can be current asset or non-current asset depends upon company?

2 Answer(s)


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1. Total Liability is Rs.20,00,000
2. The only thing that shareholders own in a company are the left over assets after paying of any liabilities. This is given by the formula (Assets - Liabilities) - and this is nothing but net worth / net assets. Hence Shareholders equity = Net Worth

3. Share capital is any money that the company gets by selling its shares. Share capital can come from both promoters and investors.

4. Its mostly a current asset, since it is used up immediately.

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because networth is used to pay shareholders dividends

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