Assets, Liabilities, and Equity
These are the three main components of the balance sheet. Assets are things that have value or generate income for a business. Liabilities are things that cost money or require payment for a business. Equity is the difference between assets and liabilities. It represents the ownership interest or residual value of a business.
Example of these concepts is buying a house. We need to know how to calculate the assets (house), liabilities (mortgage), equity (down payment), etc. of buying a house.
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In this video, William Ackman, a billionaire investor and founder of Pershing Square Capital Management, explains the basics of finance and investing.
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Understanding equity
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...
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