Which term describes the ownership interest of shareholders in a company?

The term that describes the ownership interest of shareholders in a company is owner’s equity. Owner’s equity represents the residual interest in the assets of the company after deducting liabilities. Essentially, it is what shareholders own outright, reflecting their claim on the company’s assets once all debts and obligations have been settled. This concept is fundamental in accounting and finance, as it provides insights into the financial health of a company and the value attributed to its shareholders.

In contrast, the other terms do not accurately capture the nature of shareholder ownership. Financial equity generally refers to the value of ownership interest but lacks the specific context of a company’s accounting structure. Cost of goods sold pertains to the direct costs attributable to the production of the goods sold by a company and is related to operational expenses rather than ownership interest. Working capital defines the difference between a company's current assets and current liabilities and is used to assess short-term financial health, not ownership stakes. Hence, owner’s equity is the most precise term for denoting the interest shareholders have in a company.