Stockholder's equity refers to a portion of a corporation's balance sheet that represents the capital received from investors in exchange for a share in the company (stock). In its simplest form, it is calculated as a firm's total assets minus its liabilities (debts). It may also be calculated as share capital plus the retained earnings generated by a company over time through its operations minus treasury shares. When a business must liquidate as a result of bankruptcy, stockholders are the last to be repaid.
There are many legal requirements (both at the state and federal level) around how stockholder's equity is reported on a corporation's balance sheet. For example, state laws require that the amounts received from investors and the amounts earned through business activities be kept separate in accounting records.