Equity

Equity is the ownership or stake in an asset, like a company or property. In finance, it is calculated by subtracting liabilities from assets. This means equity shows the value of ownership after accounting for any debts. For businesses, equity is derived from the investments made by owners and shareholders.

Equity = Assets - Liabilities

Assets - All the resources the company owns (For example, cash, inventory, property).
Liabilities - All the obligations that the company owes (For example, loans, account payable).

Related Terms

• Expense
• Earnings Per Share (EPS)