Adjusted equity

Adjusted equity is a better measure of the shareholders' capital than equity. Adjusted equity is equity plus (1 - corporate tax rate) times untaxed reserves.

Untaxed reserves contains earnings that not has been taxed yet but will be become taxed later. Adjusted equity is usually higher than equity, group reports that are prepared according to international accounting standards do not include untaxed reserves.

Adjusted equity is often used in fundamental analysis when you want to know a stock's value. A common key ratio is adjusted equity per share. Adjusted equity per share is adjusted equity divided by the number of shares in the company.