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Business Definition for: equity
equity

  1. assets minus liabilities, also called net worth . In a sole proprietorship, it is the owner's equity. In a corporation, it is stockholders' equity .
  2. any right to assets; property right; a liability. An equity holder may be a creditor, stockholder, or proprietor.

equity

In general: fairness. Law courts, for example, try to be equitable in their judgments when splitting up estates or settling divorce cases.
Banking: difference between the amount a property could be sold for and the claims held against it.
Brokerage account: excess of securities over debit balance in a margin account. For instance, equity would be $28,000 in a margin account with stocks and bonds worth $50,000 and a debit balance of $22,000.
Investments: ownership interest possessed by shareholders in a corporation-stock as opposed to bonds.

equity

  1. value of stockholders' ownership interest in a corporation after all claims have been paid, and thus a claim on its assets in proportion to the number, and class, of shares owned. Equity, also called net value or net worth, is total assets less total liabilities. Common stock equity of a bank is counted as part of its risk-based capital .
  2. fairness in settling legal disputes, as opposed to a strict interpretation of common law rules.
  3. residual value of a brokerage or futures margin account, assuming its liquidation at the current market prices.
  4. credit union member's ownership interest, represented by a share account .
  5. market value of real property, less any outstanding mortgages.

equity

In general: (1) residual ownership or (2) fairness.
Accounting: paid-in capital plus retained earnings.
Banking: difference between the amount for which a property could be sold and the claims held against it.
Brokerage: excess of securities over debit balance in a margin account. For instance, equity would be $28,000 in a margin account with stocks and bonds worth $50,000 and a debit balance of $22,000.
Investment: ownership interest possessed by shareholders in a corporation-stock as opposed to bonds.
Real estate: property value in excess of debt.

equity

fairness (as an objective of insurance pricing). Premium rates are set according to expectation of loss among a classification of policyowners. The premise is that all insureds with the same characteristics should have the same expectation of loss and should be listed under the same underwriting classification. For example, in life insurance, individuals with a good personal health history, family health history, a job with no special hazards, and who are of good character, should be classified as standard risks and thereby pay standard rates.

equity

the interest or value that the owner has in real estate over and above the liens against it.

Example: A property has a market value of $100,000. The owner currently owes $60,000 in mortgage loans that are against the property. The owner's equity is $40,000. See Table 21.

TABLE 21
EQUITY
Market value
$100,000
Liens - 60,000
Equity $ 40,000
Copyright © 2005, 2000, 1995, 1987 by Barron's Educational Series, Inc., Reprinted by arrangement with Publisher.
Copyright © 2006, 2003, 1998, 1995, 1991, 1987, 1985 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright c 2006, 2000, 1997, 1993, 1990 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2000, 1995, 1991, 1987 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2004, 2000, 1997, 1993, 1987, 1984 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.

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