Conceptually, shareholder’s equity speaks about a company’s net asset. In a nutshell, it is the amount shareholders are receiving if the company liquidated all of the assets and paid the debts. However, the concept of shareholder equity does not only come in equations and formulas. Because, we could also see equity in a degree of ownership in any asset after subtracting all debts. There are actually many variations on equity.
The first one is a stock. A stock concept represents an ownership interest in a company. Then, in a company’s balance sheet, shareholder equity is the amount of funds contributed by the owners and retained earnings. Other variations could be in the value of securities in a margin account minus the account holder borrowed from the brokerage. In the property business, property’s fair market value and the amount the owner remains owning on the mortgage. This is actually the amount that the owner would get after selling property. In other words, the name is real property value.
Equity is also representing the money remaining after the business repays the creditors. This could happen if the business faces bankruptcy so it has to liquidate. People call it the ownership equity or liable capital. Then there is also a term called private equity. Private equity majorly refers to a company evaluation that is not publicly traded.
The market value of equity is available by seeking the company’s share price and the market capitalization. This happens when the trading is public. On the other hand, the market mechanism does not work for the private entities. So, the other valuation form must estimate the value.
