Equity

An Equity is the difference between the total value and the total liability of an asset.

• AKA: Ownership Equity, Financial Equity.
• Context:
  • It can be solved using the Accounting Equation, i.e. Ownership Equity = Asset Value - Financial Liability.
  • …
• Example(s):
  • Equity Security.
  • Private Equity.
  • Shareholders Equity.
  • Home Equity.
  • …
• Counter-Example(s):
  • Educational Equity.
  • Health Equity.
  • Economic Equity.
  • Employment Equity.
• See: Real Property Value, Accounting Equation, Market Value, Asset, Financial Liability, Inequity.

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References

2016

• (Wikipedia, 2016) ⇒ http://en.wikipedia.org/wiki/Equity_(finance)
  • In accounting, equity (or owner's equity) is the difference between the value of the assets and the cost of the liabilities of something owned. For example, if someone owns a car worth $15,000 but owes $5,000 on a loan against that car, the car represents $10,000 equity. Equity can be negative if liability exceeds assets. Shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the equity of a company as divided among shareholders of common or preferred stock. Negative shareholders' equity is often referred to as a shareholders' deficit.

Alternatively, equity can also refer to the capital stock of a corporation. The value of the stock depends on the corporation's future economic prospects. For a company in liquidation proceedings, the equity is that which remains after all liabilities have been paid.

• (Investopedia, 2016) ⇒ Equity. (n.d.) Retrieved December 11, 2016 from http://www.investopedia.com/terms/e/equity.asp
  • What is Equity - The value of an asset less the value of all liabilities on that asset.

(...) Generally speaking, the definition of equity can be represented with the accounting equation: Equity = Assets - Liabilities

Yet, because of the variety of types of assets that exist, this simple definition can have somewhat different meanings when referring to different kinds of assets. The following are more specific definitions for the various forms of equity:

1. A stock or any other security representing an ownership interest. This may be in a private company (not publicly traded), in which case it is called private equity.

2. On a company's balance sheet, the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). Also referred to as shareholders' equity.

3. In the context of margin trading, the value of securities in a margin account minus what has been borrowed from the brokerage.

4. In the context of real estate, the difference between the current fair market value of the property and the amount the owner still owes on the mortgage. It is the amount that the owner would receive after selling a property and paying off the mortgage. Also referred to as “real property value.”

5. In terms of investment strategies, equity (stocks) is one of the principal asset classes. The other two are fixed-income (bonds) and cash/cash-equivalents. These are used in asset allocation planning to structure a desired risk and return profile for an investor's portfolio.

6. When a business goes bankrupt and has to liquidate, the amount of money remaining (if any) after the business repays its creditors. This is most often called “ownership equity” but is also referred to as risk capital or “liable capital.”

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