Equity

Equity refers to the ownership interest that an individual or group holds in a company or asset. It also can represent the residual value of an asset after all debts and other obligations have been paid off.

There are two primary types of equity: common equity and preferred equity. Common equity represents the ownership interest that is held by the common shareholders of a company, and typically comes with voting rights and a share in the company's profits. Preferred equity, on the other hand, represents a higher claim on the company's assets and earnings, and often comes with a fixed dividend payment.

Equity can also refer to the value of a property or other asset that is owned outright, without any outstanding debts or other obligations. In this context, equity is the value of an asset after liabilities are deducted from its total worth.

The formula for calculating equity is: Equity = Total Assets - Liabilities

For example, if a company has total assets of $200,000 and liabilities of $50,000, the equity of the company is $150,000:

Equity = $200,000 - $50,000

Equity = $150,000