Equity
Ownership value in an asset after all debts are subtracted. In markets, "equity" usually means stocks.
Formula
Equity = Assets − Liabilities
Equity has two related meanings in finance. At the company level, it is the residual value of assets after all liabilities are paid — what shareholders actually own. At the market level, "equities" is simply the asset class of stocks.
On a balance sheet: Equity = Assets − Liabilities. Positive equity means the company is solvent; negative equity means liabilities exceed assets (technically insolvent).
When traders say they "trade equities," they mean they trade stocks — the two words are interchangeable in most market contexts.
Related Terms
Asset
Anything with economic value that can be owned, traded, or used to generate returns — stocks, bonds, currencies, commodities, crypto.
BeginnerCapital Gain
The profit made when you sell an asset for more than you paid. Short-term and long-term gains are taxed differently.
BeginnerLong Position
Buying an asset expecting its price to rise. You profit when the price goes up; you lose when it goes down.
BeginnerMarket Capitalization
The total market value of a company's outstanding shares. Market Cap = Share Price × Shares Outstanding.
BeginnerSecurity
A tradable financial instrument — stocks, bonds, options, and ETFs are all securities. If it trades on an exchange, it is a security.
BeginnerShare
One indivisible unit of ownership in a company. Your ownership percentage equals your shares divided by total shares outstanding.
BeginnerStock
A unit of ownership in a company. Buy stock and you own a slice of the business, with rights to a share of earnings and assets.
Beginner