What is Stockholders' equity?

Stockholders' equity represents the ownership interest that shareholders have in a company. It reflects the residual interest in a corporation's assets after all liabilities have been settled. In other words, stockholders' equity is what remains for the owners of the company once all debts have been paid. This includes the initial capital invested by the shareholders, any additional capital contributed, and retained earnings – profits that have been reinvested in the business rather than distributed as dividends.

Understanding stockholders' equity is crucial as it provides insights into the financial health of a company. A higher equity indicates a stronger financial position, as it suggests that a company is able to fund its operations and growth through retained profits and investment rather than relying heavily on debt.

The other options reflect different financial concepts that do not correctly define stockholders' equity. For example, total liabilities represent obligations of the corporation, not the ownership stake. The amount of cash available speaks to liquidity rather than equity. Retained earnings are a component of stockholders' equity but do not encompass the entire ownership interest as defined by equity itself.