Personal Finance

Recording Common Stock on a Balance Sheet

All figures are in thousands

There are several numbers listed. Here's what you need to know.

Common stock

Don't be fooled by the balance sheet entry labeled "common stock." This refers to the par value (or stated value) of the stock, which has nothing at all to do with the market value of the stock. Looking at Target's balance sheet, we see that the value of common stock is listed as just $53 million while the company's market capitalization is approximately $44.5 billion.

Rather, this represents an arbitrary number stated in the corporate charter. This number is usually low -- think around one cent per share (Target's par value is $0.0833). For most companies, this section of the balance sheet is just one tiny portion of the actual value of the common stock.

Additional paid-in capital, capital surplus, or paid-in surplus

The difference between the price investors paid for the shares and the par value is referred to as additional paid-in capital, capital surplus, or paid-in surplus. This is the money that has been "paid in" to the company in exchange for an equity stake. For instance, if a company's stock has a par value of $0.01 and it issues an IPO at a share price of $20, the additional paid-in capital is $19.99 per share.

Retained earnings

The retained-earnings number tells us how much of the company's earnings has not been paid out as dividends and is available to be reinvested in the business or to pay down debts.

Putting it all together

There can be other categories that contribute to stockholders' equity, and in Target's case, these are often listed simply as "other." Since Target's "other" category is a negative number, we can infer that the company is carrying some sort of accumulated loss, which reduces the amount of equity attributable to shareholders.

Adding up all of the numbers in the stockholders' equity section gives us the total intrinsic value of the company -- that is, if the company were to sell its assets and pay off its debts, this is the amount shareholders would be left with. Now, this is usually not equal to the actual share price of the stock, since it doesn't take into account certain factors such as future growth potential. In fact, Target's stockholders' equity is about one-third of the market value of its stock. However, the common stock information on a balance sheet can give you a good idea of how much of the company's assets you actually "own" with your shares.

The $15,978 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. In fact, one MarketWatch reporter argues that if more Americans knew about this, the government would have to shell out an extra $10 billion annually. For example: one easy, 17-minute trick could pay you as much as $15,978 more... each year! Once you learn how to take advantage of all these loopholes, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how you can take advantage of these strategies.

This article is part of The Motley Fool's Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors based in theFoolsaurus. Pop on over there to learn more about our Wiki andhow you can be involvedin helping the world invest, better! If you see any issues with this page, please email us atknowledgecenter@fool.com. Thanks -- and Fool on!

The article Recording Common Stock on a Balance Sheet originally appeared on Fool.com.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More