What is the purpose of using the Statement of Stockholders' Equity instead of the Statement of Retained Earnings?

The Statement of Stockholders' Equity serves a broader purpose than just the Statement of Retained Earnings. While the Statement of Retained Earnings focuses primarily on changes in retained earnings over a specific period, the Statement of Stockholders' Equity also details other components of equity, such as common stock, preferred stock, additional paid-in capital, and treasury stock. This comprehensive overview allows investors and other stakeholders to see the full picture of equity movements and provides insights into the overall health of the company's equity structure.

When the available information does not include retained earnings, the Statement of Stockholders' Equity can still provide data on net income and common stock. This is critical because it gives stakeholders an understanding of both profitability (through net income) and the equity funding that supports the overall financial stability of the company. By understanding these elements, one can assess how equity is being affected by various factors, including the issuance of new shares or variation in retained earnings.