What is meant by Equity

  • What is meant by Equity
  • ‘Equity’ is the ownership interest in a corporation in the form of ‘common stock’ or ‘preferred stock’.
  • Hence, it can also be defined as the total assets minus total liabilities.
  • So, when seen from the point of view of a company’s balance sheet, equity is the amount of funds contributed by the owners or the stockholders plus the retained earnings.
  • Hence, in this case it is known as the ‘Shareholder’s Equity’ or ‘Net Worth’ or ‘Book Value’.
    • What is meant by Debt
      1. ‘Debt’ is an obligation to pay or do something, usually an amount of money borrowed by one party from another.
      2. Generally, debt can be in the form of a loan, note, bond, mortgage or other form etc.

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