Glossary entry
Equity represents a residual ownership interest after relevant liabilities are deducted from asset value. In a company, shareholders own equity and participate in its changing value, with rights determined by share class. In an account or property, equity describes net value rather than the gross market value of everything held.
Illustrative example
A property worth 200,000 with a remaining loan of 120,000 has equity of 80,000 before sale costs, taxes, or other claims are considered.
What to consider
Equity can shrink as asset prices fall or liabilities rise. Book equity, market value, and readily available cash are different measures.
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