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Equity: The value of a company's assets minus its liabilities; also called owner's equity or shareholder's equity.
Equity, also known as owner's equity or shareholder's equity, refers to the residual value of a company's assets after its liabilities are subtracted. It represents the portion of a company's value that is owned by its shareholders or owners.
Equity can be calculated by subtracting a company's liabilities from its assets. The resulting figure represents the company's net worth or book value. Equity is an important measure of a company's financial health, as it indicates the amount of value that is available to its owners or shareholders.
Equity can be further divided into two main categories: contributed capital and retained earnings. Contributed capital refers to the funds that are invested in a company by its owners or shareholders in exchange for ownership or equity in the company. This can include funds that are invested when the company is first formed, as well as any additional funds that are later invested to support growth or expansion.
Retained earnings, on the other hand, refer to the portion of a company's profits that are retained within the company rather than distributed as dividends to shareholders. Retained earnings are an important source of equity for many companies, as they represent the amount of value that has been generated by the company's operations over time.
Overall, equity is an important measure of a company's financial health and value. By carefully managing equity and making strategic investments to support growth and expansion, companies can build long-term value and provide a return on investment to their shareholders or owners.