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Equity has different meanings depending on the context. Shareholder's equity is the most common type of equity - it represents the amount of money that a company's shareholders will get if all of the assets were liquidated and all the debt was paid off.
Equity can be found on a company's balance sheet. Analysts use this data to assess the financial health of a company.
Shareholders' Equity = Total Assets - Total Liabilities
The information for this formula can be found on the company's balance sheet by using the following steps:
A less common method to find the shareholder equity is the company's share capital and retained earnings less the value of treasury shares.
We can think of equity as a degree of ownership in any asset after deducting all debts associated with that asset.
Common variations on equity:
Private equity is the evaluation of companies that are not publicly traded. Only "accredited" investors can access private equity, but regular investors can make use of exchange-traded funds (ETFs).
Usually, a new company with no revenue or earnings can't afford to borrow. It gets capital from friends, family, or individual "angel investors."
Home equity is the value of a home minus the mortgage debt owed. A homeowner can use home equity to get a home equity loan - otherwise known as a second mortgage.
Brand equity. Assets may include tangible assets, like property, and intangible assets, like a company's brand identity. Brand equity measures the difference between the value of a brand and a generic version of a product, for example, Coke vs a store brand cola.
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