Equity
Financial Accounting glossary · Stockholders' Equity
Definition
Residual interest in the assets after deducting liabilities.
Equity in plain English
Equity is what's truly YOURS once everyone you owe has been paid off — it's the leftover. Take everything the company owns (assets) and subtract everything it owes (liabilities), and equity is what remains for the owners. If your car is worth $20,000 but you still owe $8,000 on the loan, your equity in the car is $12,000. That's why it's called the 'residual' interest: it's the residue, the piece left over after the debts are settled.
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