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Equity

Equity is the total value or worth of an asset. It is either an individual’s or company’s shares and ownership rights of an asset, and does not represent an obligation to pay in the future. The ownership of a company also includes the retained earnings or losses of the company. In this way, equity is the ownership of an asset after all debts associated with that asset have been paid, and the asset liquidated.

On a balance sheet, equity is calculated as the total assets minus the total liabilities. In real estate, the owner’s equity is the value of the house minus the remaining mortgage or loan amount due. In a company, the ownership interest takes the form of stocks or shares in the company.

 

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