What is the difference between equity and capital?

Equity and capital are terms used to describe the monetary interest owners or shareholders have in a business through funds, assets or shares. While equity and capital have some similarities, there are key differences between these two terms that are important for successful business owners to know to ensure financial success for their companies.

What is an example of equity capital?

Let’s look at an example of equity capital to better understand the concept. Let’s imagine that a company has a total asset of $10,000,000 on its balance sheet and total liabilities of $8,000,000. The company’s equity capital, therefore, represents the difference between the total assets and total liabilities, amounting to $2,000,000.

What does positive equity capital mean on a balance sheet?

When a company’s equity capital is positive on its balance sheet, it means that it has enough assets to pay for all its liabilities . However, if a company’s equity capital is negative on its balance sheet, it means that the company’s liabilities exceed its assets. Equity capital is also important for investors purchasing equity securities.

What is the difference between primary equity markets and equity capital?

Equity capital is raised by issuing shares in the company, publicly or privately, and is used to fund the expansion of the business. Primary equity markets refer to raising money from private placement and mainly involves OTC markets.