What is Equity?

To put it simply, equity means ownership. This means if you own equity in a company, you own a part of it. In financial terms, you can say that equity is the value of your holdings after subtracting debts or liabilities.

For example, imagine you bought a car worth $20,000, but you still need to pay $8,000 to the bank.

So the value that truly belongs to you is $12,000.

That $12,000 is your equity.