Equity

The company's own money, which it never has to repay

In detail

Take total assets, subtract what is owed, and the rest is equity: what shareholders put in plus the profit kept over the years. Because none of it has to be repaid, a thick layer makes a downturn easier to survive. Divided per share it becomes book value.

Example

Assets of $100 million less debts of $60 million leaves $40 million of equity.

Related terms

Balance sheet Equity ratio Book value per share

Read in the app (App Store)

For learning, not investment advice. Decisions are your own.