Equity · Core
Shareholders' Equity
Shareholders' equity is residual interest in assets after deducting liabilities — book capital, not the market cap.
Definition
Equity = assets − liabilities. It stacks common stock, APIC, retained earnings, AOCI, and treasury stock. Market capitalization is the market’s residual claim and can diverge from book for years.
Why it matters
Regulators, covenants, and buybacks all hit book equity. A firm can have a huge market cap and thin tangible book — banks live in that gap.
Case
A rate shock marks AFS bonds through AOCI and shrinks bank equity without a loan loss. The stock may still trade on NIM stories until the book is the story.
How to read it
Prefer tangible common equity when intangibles and AOCI dominate. Market/book is a valuation, not a solvency number.
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