What does Shareholder’s or Owner’s Equity include?

Shareholder’s or Owner’s Equity encompasses the net value that belongs to the owners of a business. This value is essentially the owners' investment in the company along with the retained earnings, which are the profits that have not been distributed as dividends.

The correct choice highlights that Owner’s Equity is calculated by summing the initial and subsequent investments made by shareholders in the company and adding the accumulated undistributed earnings. This figure is essential as it represents the fundamental value that shareholders possess after accounting for all liabilities.

This concept is pivotal in financial accounting as it reflects the residual interest in the company's assets after deducting liabilities. Thus, it gives investors an idea of the financial health and stability of a business over time, serving as a foundational element for assessing a company's worth and performance.