a question for a fundamental expert. can someone explain the importance of shareholder equity? im trying to learn the importance shareholder equity and return on equity and weather an investor would always want to stay away from stocks that are negative in those areas. can someone point me to easy to understand reading material on the subject.
Negative shareholder equity means that debts exceed assets (including any fluff a lot of companies have on their balance sheet like huge goodwill amounts from way overpaying for companies they bought). You'll have to decide for yourself based on your anticipated hold time horizon and other personal portfolio factors whether you want to hold stocks that owe more money than their assets are worth.