Equity (finance)

In finance, equity is an ownership of property that may be affected by debts or future events tied to the property, which are called liabilities. It is measured by subtracting liabilities from the value of the assets owned. ^[1] For example, if someone owns a car worth $24,000 and owes $10,000 on the loan used to buy the car, the difference of $14,000 is equity. Equity can apply to a single asset, such as a car or house, or to an entire business. A business that needs to start up or expand can sell its equity in order to raise cash. People who buy a house with a mortgage have equity if the value of the house is worth more than the mortgage. If the mortage is more than the property is worth they are said to have negative equity.

References

1. Bragg, Steven. "How to calculate total equity". AccountingTools. Retrieved 2023-04-10.