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 difference between the paid-in capital and retained earnings.

Equity is the sum of what the initial stockholders paid when they bought company shares and the earnings that the company has retained over the years.

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 $459 million, whereas this year it increased to $540 million. How much was paid out in dividends this year?

$280 million

$55 million

$4 million

$217 million