Equity Definition

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• There are various types of equity, but equity typically refers to shareholder equity, which represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company's debt was paid off.
• We can think of equity as a degree of ownership in any asset after subtracting all debts associated with that asset.
• Equity represents the shareholders’ stake in the company. The calculation of equity is a company's total assets minus its total liabilities.

The Formula for Shareholder Equity Is

$Shareholders'~equity = Total~Assets - Total~Liabilities$

How to Calculate Shareholder Equity

The balance sheet holds the basis of the accounting equation, which is as follows:

$Assets = liabilities + shareholder~equity$