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Equity

Equity

Simply put:

Equity = Assets – Liabilities

However, since there are a number of different types of assets, this definition cannot encompass them all and will have different meanings for each. The following are some common definitions for different equities:

  • An ownership equity is represented by a security such as a stock. This can be in a private company which does not trade publicly.
  • Shareholder’s equity refers to the funds that are contributed by the owners or shareholders along with losses. This is mentioned in a balance sheet.
  • Equity is also considered to be the value of securities in a margin account but not including the amount that is borrowed by the brokerage. This is common in margin trading.
  • In real estate, equity is the difference between the existing fair market value and the amount owed on mortgage by owner of the property. The amount will be received by the owner after the property is sold off and the mortgage has been paid off. This is also known as real property value.
  • In investment strategies, equity refers to stocks and these are part of the main asset classes besides cash equivalents and bonds. These are used during asset allocation planning.
  • Ownership equity or risk capital refers to the amount of cash that is left after a business goes bankrupt, liquidates and pays off all of its creditors.

The meaning of all of the abovementioned terms can differ according to context. You can perceive equity as ownership in an asset after the debts that belong to it are paid off. For instance, if you have a car that is free of debt then it will be considered your sole equity since you can sell it for cash without facing difficulties. There will be no outstanding debt between you and the sale in other words.


Further Reading

The economics of small business finance: The roles of private equity and debt markets in the financial growth cycleThe economics of small business finance: The roles of private equity and debt markets in the financial growth cycle
www.sciencedirect.com [PDF]
This article examines the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small …

Equity in health care finance and deliveryEquity in health care finance and delivery
www.sciencedirect.com [PDF]
This article examines the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small …

The Puzzle of Equity Financing Preference in China's Listed Companies [J]The Puzzle of Equity Financing Preference in China's Listed Companies [J]
en.cnki.com.cn [PDF]
This article examines the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small …

Equity in the finance of health care: some further international comparisonsEquity in the finance of health care: some further international comparisons
www.sciencedirect.com [PDF]
This article examines the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small …

Analysis of equity warrants as investment and finance instruments.Analysis of equity warrants as investment and finance instruments.
elibrary.ru [PDF]
This article examines the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small …

Underperformance in long-run stock returns following seasoned equity offeringsUnderperformance in long-run stock returns following seasoned equity offerings
www.sciencedirect.com [PDF]
This article examines the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small …

Capital market imperfections, high‐tech investment, and new equity financingCapital market imperfections, high‐tech investment, and new equity financing
academic.oup.com [PDF]
This article examines the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small …

On the social representations of intergenerational equityOn the social representations of intergenerational equity
papers.ssrn.com [PDF]
This article examines the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small …

An equity perspective on access to, enrolment in and finance of tertiary educationAn equity perspective on access to, enrolment in and finance of tertiary education
www.tandfonline.com [PDF]
This article examines the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small …


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