Equity / Equities
Equity (or Equities, or Owner’s equity) in a company is the ownership interest possessed by shareholders in the assets of a corporation. Because a corporation’s owners equity plus its liabilities must equal its assets (see accounting equation), it follows that owner’s equity must equal the corporation’s assets minus its liabilities. What is left for the owners (shareholders), in other words, after all creditor’s claims have been taken. Owner’s equity is also referred to as net worth.
Owner’s equity is thus one of the three main sections of a company’s balance sheet (along with assets and liabilities). Owner’s equity, in turn, has two main components: contributed capital and retained earnings.
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