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Username: Maria

Rating:
Guru Stars

Asked to: Heng Kim

Date Created: 05 Feb 2018
Category 46
Tag Financial
Question What is 'Equity'?
Advice from Guru
Hello Maria,

Generally speaking, equity is the value of an asset less the amount of all liabilities on that asset. It can be represented with the accounting equation: Assets -Liabilities = Equity.

Equity can have somewhat different meanings, depending on the context and the type of asset. In finance in general, you can think of equity as one’s degree ownership in any asset after all debts associated with that asset are paid off. For example, a car or house with no outstanding debt is considered entirely the owner's equity because he or she can readily sell the item for cash, and pocket the resultant sum. Stocks are equity because they represent ownership in a firm, though ownership of shares in a public company generally does not come with accompanying liabilities.

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