Equity refers to the total fund that needs to be returned to a company’s shareholder, once all the assets are dissolved and all debts are paid off during liquidation. In hardcore commerce, equity reflects the shareholder’s ownership for the given company.
Substracting the total assets of a company from its liabilities gives you equity. It can be further categorized into book value and market value. For any financial statement, the market value is used to define equity. Oftentimes, they are greater or lower than the actual book value.
Book values are often determined based on the industry, the company is working for. How it maintains its assets are considered as well. For a publicly-traded company, it is fairly easy to determine the market value. How the recent share prices compounded over the outstanding shares can give the market value for a company.
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