Equity

In finance and accounting, ownership equity, commonly known simply as equity, but also as risk capital or liable capital, is the difference in value between the assets and the claims on them (liabilities), which accrues to the owner(s). In case the owners are shareholders it is usually called shareholders' equity.

Equity

In finance and accounting, ownership equity, commonly known simply as equity, but also as risk capital or liable capital, is the difference in value between the assets and the claims on them (liabilities), which accrues to the owner(s). In case the owners are shareholders it is usually called shareholders' equity.

In a bankruptcy court, creditors have the first claim on assets and ownership equity is the last or residual claim against assets, paid only after all other creditors are paid.

For example in real estate, the owner's equity in a property is the difference between the market price of a property and the owner's mortgage debt.

Equity can be a source of assets, either through contributed capital (the contribution of capital resources i.e. assets from the owners) or retained earnings (when the business increases assets through earning activities.) These retained earnings can then be distributed to the owners (through equity draws, or dividends depending on the corporate structure) or kept in the business.

Shareholders' Equity

In business and accounting, the shareholders' equity refers to the amount of assets that are owned by a company's shareholders.

Contents:
1 Accounting
2 Accounts
3 Financing

Accounting

The shareholder's equity can be calculated as the value of a company's assets less the value of its liabilities. Shareholders' equity appears on the liability side of a company's balance sheet.

Accounts

Accounts listed under shareholders' equity include (example ([1])):
Stock options
Stock capital (share capital) (can include redeemable preferred stock, preferred stock, common stock)
Retained earnings
Treasury stock
Capital surplus (stock capital, share capital, paid in capital)

Financing

Equity financing is the method by which a company raises money by selling shares, for example through an IPO.

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