What is an Equity?
A Brief Explanation of an Equity | Definition
Equity has many different definitions depending on the context invoked. Generally, equity refers to ownership in a type of asset class. For example in real estate equity refers to the difference between the value of the property and the amount still owed. If a home’s mortgage has been completely paid off, the entire value of the property is represented as equity. Similarly, stocks and other financially traded instruments are considered equity because they represent ownership in an entity. Hence, equity can be referred to the value of ownership in a business. In accounting, shareholders’ equity is related to ownership in a company in that it refers to the value of the contributed capital plus (or minus) the retained earnings (or losses).
Similarly, how much equity a person has in a business refers to the percent of ownership. In private equity, equity is stock or ownership in a privately owned company. Private ownership, or a non-public company, defines the equity as private. Bain capital, a private equity firm, has equity in many non-publicly traded portfolio companies including Guitar Center.
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