Can someone please explain to me what it means if stockholders equity is less than total liabilities? Is it a good or bad thing?

It's not necessarily a "bad" thing - it just means the company could be taking advantage of leverage. Up to a point, higher amounts of leverage increase Return on Equity, "ROE".

Using DuPont analysis....
Since ROE = Return on Assets ("ROA") x Assets / Equity
(Assets / Equity is also known as the "equity multiplier")
an increase in debt can increase ROE, all else equal

Example: Assume a company's ROA is 10%...and
Assets: 100
Liabilities: 60
Equity: 40
A / E = 100 / 40 = 2.5
ROE = 10% x 2.5 = 25%

By comparison, assume the above company's competitor had higher levels of debt, but the same 10% ROA...
Assets: 100
Liabilities: 80
Equity: 20
Assets / Equity = 100 / 20 = 5
ROE = 10% x 5 = 50%

Also keep in mind that debt is usually a less expensive cost of capital than equity, generally due to the deductibility of interest expense, and the fact that creditors have a claim on a company's assets that is superior to that of equity holders. Of course, there comes a point where too much debt is simply unsustainable. But, as demonstrated above, increased leverage (e.g. increased debt) can improve ROE....Show more

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