- Equity represents the value that would be returned to the company’s shareholders if all assets were liquidated and all debts of the company were paid off.
- We can also think of equity as the degree of residual ownership of a firm or asset after deducting all the debt associated with that asset.
- Equity represents the share of shareholders in the company, indicated in the balance sheet of the company.
- The calculation of equity represents a company’s total assets less its total liabilities, and it is used in several key financial metrics such as ROE.
- Net worth is the value of the homeowner’s property (minus debt) and is another way of using the term “net worth”.