What type of shares are considered a part of shareholder equity?

Shareholder equity represents the owners' claim after all liabilities have been settled in a company. It includes several components that illustrate the value contributed by shareholders and the retained earnings generated by the company over time.

Common shares are the most basic form of equity ownership in a company, granting shareholders the right to vote and receive dividends. Preferred shares, while generally lacking voting rights, come with a fixed dividend and are prioritized over common shares in the event of liquidation. Retained earnings reflect the accumulated profits that have not been distributed as dividends but reinvested into the business, contributing to future growth.

Since all these components—common shares, preferred shares, and retained earnings—are integral parts of shareholder equity, it is correct to state that they collectively complete the shareholder equity section of a company's balance sheet. Each plays a significant role in defining the financial health and ownership structure of the company, establishing why all options contribute to the broader umbrella of shareholder equity.