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The Statement of Changes in Shareholders' Equity: the key to making better financial decisions



The statement of changes in equity is a financial statement that shows the changes in a company's equity over a period of time. Equity is the difference between a company's assets and liabilities. The statement of changes in equity shows how a company's equity has changed as a result of earnings or losses, capital contributions, and distributions.


The statement of changes in equity is divided into three sections:

  • Income: This section shows the revenues and expenses that have affected a company's equity over the period of time.

  • Capital: This section shows the changes in a company's share capital over the period of time.

  • Distributions: This section shows the distributions of capital that have been made to a company's owners over the period of time.

The statement of changes in equity is an important financial statement because it provides information about how a company's equity has changed over a period of time. This information can be useful for investors, creditors, and other users of financial statements to assess a company's financial health.

Here are some examples of how the statement of changes in equity can be used by investors, creditors, and other users of financial statements:

  • Investors can use the statement of changes in equity to assess a company's performance. By comparing a company's income, capital, and distributions of capital from one period to another, investors can obtain information about how the company is generating earnings and using its resources.

  • Creditors can use the statement of changes in equity to assess a company's risk. By observing the changes in a company's equity, creditors can obtain information about a company's ability to repay its debts.

  • Other users of financial statements can use the statement of changes in equity to obtain information about a company's financial health. The statement of changes in equity is a useful tool for assessing a company's ability to generate earnings, use its resources, and repay its debts.

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