What is business equity & why is it important?

The initial funds you or others invest in your company help lay the foundation for your business’s equity. Your business equity represents ownership and the value of your business. Read on to learn more about what is business equity, how to calculate it, and the importance of equity in a business. What is equity? So, what is equity in a business?

What type of equity does a company have?

Shareholders’ equity: This type of equity is also known as stockholders’ equity and refers to the shares of stocks owned by the company’s investors or shareholders. This includes retained earnings, which are profits that have been saved, rather than paid out to shareholders as dividends.

How do you determine the equity of a business?

You can typically determine the equity of a business by reviewing its balance sheet, which is a financial statement that lists the company's assets, liabilities, equity capital and total debt over a certain period.