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The Term “Equity” Has Two Main Meanings:

  • In finance, equity refers to the value of a company’s assets minus its liabilities. It is also known as shareholders’ equity or stockholders’ equity.
  • In social justice, equity refers to fairness and justice. It is often used to refer to the need to address systemic inequalities that have created unfair outcomes for certain groups of people.

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In the context of finance, equity is calculated by subtracting a company’s liabilities from its assets. The resulting figure represents the amount of money that would be returned to the company’s shareholders if all of the assets were settled and all of the liabilities were paid off.

Equity can be positive or negative. A positive equity balance indicates that the company’s assets are worth more than its liabilities. A negative equity balance indicates that the company’s liabilities are worth more than its assets.

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