What is equity?

Equity is the owners' residual interest in a business after liabilities are subtracted from assets. It represents the value that would remain for owners if all debts were paid and is a key component of the accounting equation.

Example: A business with $500,000 in assets and $200,000 in liabilities has $300,000 in equity.

Related terms: Assets, Liabilities, Balance Sheet, Retained Earnings