5. Stockholders' equity

The right side of the balance sheet shows the firms liabilities and stockholders equity.

Which of the following best describes shareholders equity?

Equity is the initial claim on value of the assets before the firm pays off its liabilities.

Equity is the difference between the companys assets and liabilities.

NOW Inc. released its annual results and financial statements. Grace is reading the summary in the business pages of todays paper. In its annual report this year, NOW Inc. reported a net income of $136 million. Last year, the company reported a retained earnings balance of $425 million, whereas this year it increased to $500 million. How much was paid out in dividends this year?

$4 million

$61 million

$211 million

$310 million