What does owner’s equity represent in a company's financial statement?

Owner’s equity represents the owner's share of the company, reflecting the residual interest in the assets of the company after deducting liabilities. Essentially, it indicates what remains for the owners once all obligations are settled. This metric is vital for assessing the financial health of a business, as it shows how much of the company's resources are owned outright by the shareholders.

In a financial statement, particularly in the balance sheet, owner’s equity is calculated by subtracting total liabilities from total assets. It encompasses retained earnings, additional paid-in capital, and other factors that contribute to the net worth of the business from the perspective of its owners. This is crucial for potential and existing investors as it provides an insight into the equity stake they hold in the company.