Consider the technology company Snap Inc (NYSE: SNAP). When you look at its balance sheet we see that Ret. Earn.(Accum. Deficit) is (7,778) Million.
Yet it has a positive shareholder equity value. Total Equity is 2,199 Million. As a student who is still new to the world of financial statements. How exactly is this possible?
While your assessment is fundamentally correct, you are missing one simple thing: The question is not whether it ever had an income, but what the value is of the assets held by the company.
Example 1: Every year you spend $10k more than you earn. Are you bankrupt? Well, you own a couple of hectare of land that you can sell for millions. Have fun spending your money!
Example 2: I give you an account with $100k. You take out $1000 per year for 5 years. You still have positive equity despite never making any money.
In case of Snap Inc - same basic accounting principle. Equity is assets - liabilities. So, Snap Inc still has equity by simply having more assets than liabilities. One way is by doing a large IPO and taking in a TON of investor money that still is not used up.
Let's have a look at the stock chart. This is a nice income statement, but it is NOT A BALANCE SHEET. If you look at the balance sheet you see it has a TON of equity, TON of invested capital, heck, and still a ton of working capital. Here are the hectares of land (i.e. the asset worth a LOT) and the accumulated debt is not large enough to completely offset those.
