Question:

Is it possible to have negative Shareholder's Equity? If so, how?

Answer hidden.

Answer:

Yes it is possible.

The most common scenarios that would lead to negative Shareholder's Equity:

  1. If a company has been losing money over the years, they have a declining Retained Earnings balance which can sometimes turn Shareholder's Equity negative.
  2. LBOs with dividend recapitalizations. The PE firm may have taken out a large portion of its equity in cash which can sometimes turn Shareholder's Equity negative.

Other

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