Equity in business is a measure of a company's financial health, representing the value to shareholders if assets were liquidated and debts paid. It includes common stock, preferred stock, retained earnings, and APIC. Equity is crucial for raising capital, with methods like IPOs and FPOs, and for assessing a company's financial performance through metrics like ROE. Different forms of equity, such as common and preferred shares, private equity, and equity derivatives, serve various strategic purposes in business expansion and stakeholder engagement.
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Equity is the value returned to shareholders after liquidating assets and paying off debts, composed of common stock, preferred stock, retained earnings, and additional paid-in capital
Net Assets
Net assets and equity are interchangeable terms in accounting, representing the difference between total assets and total liabilities
Shareholders' Equity
Shareholders' equity is the owners' claim on a company's assets, calculated as the difference between total assets and total liabilities
Equity is a crucial indicator of a company's financial health and performance, with metrics like Return on Equity providing insight into its profitability
Companies issue shares to investors through equity financing to raise funds for various purposes, such as expansion and debt restructuring
Public Offerings
Public offerings, such as IPOs and FPOs, allow companies to raise capital from the public through the sale of shares
Private Equity
Private equity refers to investments in private companies, providing a source of capital outside of public markets
While equity financing offers benefits like no repayment obligation and potential for significant capital, it also has downsides, such as dilution of ownership and public company regulations
Equity capital is the funds contributed by shareholders, calculated by summing up issued share capital, reserves, and retained earnings
Equity capital is crucial for providing necessary funds for daily operations and long-term investments, strengthening a company's financial foundation and improving its borrowing ability
Common Equity
Common equity includes voting rights and a claim on a company's assets in the event of liquidation
Preferred Equity
Preferred equity offers fixed dividend payments and priority in asset claims, but usually without voting rights
Equity Derivatives
Equity derivatives are financial instruments whose value is derived from the price of underlying stocks
Equity is used in scenarios such as startups raising capital, corporations issuing stock, and implementing employee stock ownership plans
Equity is utilized for capital raising, employee incentives, and transaction facilitation
The equity formula, Assets - Liabilities = Equity, is fundamental in evaluating a company's financial health and position
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If a company liquidated its assets and settled its debts, the remaining value for the ______ is known as equity.
shareholders
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Equity, also known as ______ or 'shareholders' equity', is found by subtracting total liabilities from total assets.
net assets
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Equity Financing Purpose
Raising funds for expansion, acquisitions, debt restructuring.
