What Is Equity?
equity has several meanings in the financial world. simply defined, it is the value of an asset after all the liabilities or debts on the asset have been paid. for example, joe opens a small bakery. he borrows $10,000 to buy the building and supplies for the bakery. the business becomes a very successful bakery. with his profit, joe has paid for all the supplies and has paid $5,000 ? the loan on the building. the bakery now has accumulated $5,000 in equity, since joe was able to pay half the loan. once joe pays back the entire loan, his equity will increase again. it will also increase if the property value of the building increases. equity can also be the stock that you own in a business. this is called shareholder's equity and these stocks represent an ownership in a business. whether you are describing equity in a business, home or stock market, it is simply the value of your business or property after any amounts, debts or liabilities that are owed on it.