Explain equity
Equity is a financial term used to represent the ownership value in an asset or business after all liabilities and debts are paid off. It also indicates the difference between the value of the asset and the amount of the outstanding loan. For example, if a person buys a house worth $200,000 and takes out a mortgage loan of $150,000, the equity in the house is $50,000. It means that the person owns $50,000 of the house and has the right to sell or mortgage it for that amount.
Equity can also refer to the ownership interest in a company or business. It is the ownership stake that shareholders hold in the business. The value of equity for a company is calculated by subtracting its total liabilities from its total assets. Equity represents the residual value of a business that remains after all its debts have been paid. It is an important metric for investors as it provides a measure of the company's financial health and profitability. Companies with high equity values are often seen as more stable and financially secure, making them attractive to investors.