Equity as it relates to business and finance defined

What is equity?

The term equity has different definitions depending on the context it’s being viewed from. In finance as is our case the question what is equity can be summarized to mean: ownership or stock that represents ones ownership in an asset whose debts are paid. In some assets it can be the difference between the current market value and unpaid debt on the asset as at the time. For example ones equity against a house or home can be determined by the difference between the current value and the unpaid mortgage on the property. There is the possibility of having negative equity which means that the debt is higher than the value of the asset. Equity can also be defined as an individual’s stock that he/she fully owns and can transfer or exchange for cash. In a company, equity is what all stakeholders bring to the table as capital also known as risk capital. It is known as risk capital because it is used in the liquidation of a company in case the company goes bankrupt.

Equity shares

These are the shares or stocks bought from a company during an IPO and subsequent trading. It gives you ownership capacity depending on how much stock you hold which can be termed as equity. The more the value of the stock or shares the more your dividends as a shareholder.