It is often seem that Balance sheet shows the share holders fund as Positive value. So, is it possible that the balance sheet shows negative shareholder’s fund too? What is the formula to calculate such value, then?
Negative shareholder equity could show up on a company’s balance sheet for a number of reasons, all of which should serve as red flags to look much closer before investing.
To understand why, you need to look no further than the formula for shareholder equity:
Total Assets – Total Liabilities = Shareholder Equity
Example: if total asset is 500000 and the total liability is 550000 then, in balance sheet a value of -50000 will be shown in the liability portion, to adjust the value of the balance sheet.