Walk me through the major items in SE
Answer
This one stinks, just memorize the below. SE stands for Statement of Stockholders’ Equity. The SE in A = L + SE.
Common Stock: Par value of issued stock
Retained Earnings: Accumulated Net Income over time
Additional Paid in Capital: Keeps track of how much stock-based compensation has been issued and how much new stock existing employees exercising options have created.
Treasury Stock: The dollar amount of shares that the company has bought back
Why this matters to bankers
Shareholders’ Equity is an endpoint of the Balance Sheet and ensures that all three statements tie together. In order to forecast it correctly, bankers must understand each component and how they work.