Owners’ equity (OE) in a corporation rises or falls with the profitability of that corporation. OE equals the net assets of a corporation and is made up of two main components, paid-in capital and earned capital. Paid-in capital is made up of the funds provided by stockholders also known as contribution capital, and any additional paid-in capital from other sources. Earned capital consists of the retained earnings of a corporation and is derived from the profitability of operations within that corporation (Kieso, Weygandt, & Warfield, 2007). Beyond the basic definition of OE, an investor must know the importance of keeping paid-in and earned capital separate, which is more important, and understand basic versus diluted earnings per share.…