# Can shareholders’ equity be more than total assets?

I was just learning about DuPont Identity on investopedia with this example:

``````#DuPont Identity Example Calculation
Assume a company reports the following financial data for two years:

Year one net income = \$180,000
Year one revenues = \$300,000
Year one total assets = \$500,000
Year one shareholder equity = \$900,000

Year two net income = \$170,000
Year two revenues = \$327,000
Year two total assets = \$545,000
Year two shareholder equity = \$980,000

Using the DuPont identity, the ROE for each year is:

ROE year one = (\$180,000 / \$300,000) x (\$300,000 / \$500,000) x (\$500,000 / \$900,000) = 20%
ROE year two = (\$170,000 / \$327,000) x (\$327,000 / \$545,000) x (\$545,000 / \$980,000) = 17%

With a slight amount of rounding, the above two ROE calculations break down to:

ROE year one = 60% x 60% x 56% = 20%
ROE year two = 52% x 60% x 56% = 17%
``````

Shareholders’ equity = total assets − total liabilities

So the total liabilities should be a negative value in order to get a greater shareholder equity than the total assets.

I am clearly missing some pieces of the puzzle, but I don't know what.

• A negative liability (like a prepaid liability) would be an asset, no? – RonJohn Oct 21 '19 at 17:44
• Technically yes, but still should be stated as a positive value in accounting, shouldn't be? – MattSom Oct 21 '19 at 17:48
• Oh, yes. "Prepaid utilities" or some such. – RonJohn Oct 21 '19 at 17:52