Apple Stock Price Reflected in Financial Statements? Shareholder's Equity and Market Valuation

Question

Is the increase in Apple's stock price reflected in Apple's own financial statements? In your response to this question, discuss whether the shareholder's equity in a public entity's financial statements is a fair reflection of its current market valuation.

Answer 1

Stock price changes would be shown in the Additional Paid-In Capital section of the Balance Sheet between the 2 years reported. There also might be a note stating the increase. Shareholder's Equity totals is NOT a fair reflection of its current market valuation because the section also includes the stock's base price (par value) and Retained Earnings. The Retained Earnings line accounts for net income minus any dividends that Apple had to pay to its shareholders.

Hope that makes sense.