How can shareholders' equity be calculated?

Shareholders' equity represents the ownership interest of shareholders in a company and can be accurately calculated by deducting total liabilities from total assets. This calculation effectively illustrates the residual interest that shareholders have after all debts and obligations are settled. The formula can be summarized as follows:

Shareholders' Equity = Total Assets - Total Liabilities

By understanding this relationship, individuals can comprehend how much of the company's resources are financed by the owners versus creditors. This metric is critical for assessing financial health, as a positive equity value indicates that a company has sufficient assets to cover its liabilities, offering a measure of security for investors.

The other options do not correctly represent the calculation of shareholders' equity. Adding total assets to total liabilities does not yield equity but instead reflects total company obligations and resources. Calculating total revenue and expenses pertains to assessing profitability rather than ownership equity. Lastly, while market value versus book value can provide insights into a company's perceived worth and market conditions, it does not directly compute shareholders' equity in the way that the subtraction of liabilities from assets does.