Equity definition

Equity is the ownership interest of preferred and common shareholders in a company. It is also an accounting term representing the total of assets less liabilities (net worth).

Equity may also refer to the net of market value less liabilities as in the equity held in a property or other asset. For example, a property may have a market valuation of $400,000 and a mortgage of $240,000 and liens of $10,000. The difference of $150,000 represents the owner's equity in the property.

Equity, therefore, represents owned value. Building equity is often a good business strategy, especially when a future market for that equity is foreseen or the value may be leveraged.