Equity refers to the ownership interest in a business or asset after all liabilities have been deducted. It represents the value that an owner has in their investment, which can increase or decrease based on the performance of the business or asset.

Characteristics
– Ownership Stake: Equity signifies a claim on the assets and earnings of a business.
– Residual Value: It is the value remaining after all debts and obligations are settled.
– Potential for Growth: Equity can appreciate over time, leading to increased wealth for the owner.
– Risk and Reward: Equity holders face risks, as their investment can lose value, but they also have the potential for higher returns compared to debt holders.

Examples
– Common Stock: When individuals buy shares of a company, they acquire equity in that business, giving them ownership rights and a claim on future profits.
– Real Estate Ownership: If a person owns a home, the equity is the market value of the home minus any outstanding mortgage balance.
– Private Business Ownership: An entrepreneur who starts a business retains equity in the company, which can be sold or transferred as the business grows.