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Equity is the ownership value left in an asset, company, or account after any liabilities are subtracted. The word also names an asset class: shares in companies are collectively called equities.
In its ownership sense, equity is total assets minus total liabilities. On a company balance sheet this is shareholders' equity, the net book value the owners hold; in a trading account it is the account balance adjusted for the running profit or loss on open positions.
Equity differs from a liability, which is value owed rather than owned. As an asset class, equities differ from debt instruments such as bonds: a shareholder owns part of the company and ranks behind bondholders if it is wound up.
Equity misoli
A company holds USD 1 million in total assets and USD 400,000 in total liabilities.
Its equity is:
equity = total assets - total liabilities
USD 1,000,000 - USD 400,000 = USD 600,000
The company has USD 600,000 of equity, the value that belongs to its shareholders once debts are settled.