Equity in technical terms refers to the amount of money that will be returned to the company’s shareholders if all the assets were liquidated and all the debts of the company were paid off. The book value of the company is also represented by shareholder equity.
You can find about equity on the company’s balance sheet and it is the common data that is used by analysts to assess the financial health of the company.
Below mentioned is the formula that will help you determine the equity of the owners.
Shareholder’s Equity = Total Assets – Total Liabilities
The shareholder’s equity equation depicts the picture of the company’s finances which helps in the interpretation of the financial of the company. Equity is used to purchase assets, maintaining fund operations, invest in projects, and equities are also used as capital raised by the company.
The value of an investor’s stake in any company is represented by equity and it also represents the proportion of companies share. In accounting terms equity is considered as residual interest in an entity. As an investor, you contribute to the capital requirements of business and you become a shareholder of the company. Dividends and Capital Appreciation are the two ways you earn from the equity.
Various factors affecting the market value of Equity:
The market becomes more competitive if the number of traders, analysts, investors increases.
There is high fluctuation in the market which leads to a sudden increase or decrease in the price of the equity.
Budgets and Government decisions also affect the market value of equity. If the Budget is in favor the prices rise and if the budget is against then prices fall drastically.
Invest in Equity
Equity investment is simple and easy. You must stay clear with your investment decisions. It is just a way by which you purchase the stake in the company. To invest in Equity, you need a Demat & Trading account with the registered Broker. Your broker will provide you the platform where you can buy or sell the equity.