Equity

Equity, in economics, value of the assets of a company less its liabilities. In a mortgage or hire-purchase agreement the equity is the amount remaining for the borrower if the mortgaged or purchased item is sold and the debt repaid. In other words, it is the financial stake of the owners or shareholders of a company; hence the use of the term “equities” to refer to ordinary shares traded in stock exchanges. A shareholder’s equity is the price that can be obtained for their shares; or, in the case of the company going into liquidation, the shareholder’s proportionate share of the money left after those with a higher priority claim on the company’s assets (such as creditors and holders of preferential shares) have been paid. Because of their low-priority rights, equities are in theory more risky than other investments; their attraction to investors being the chance of a higher return than that provided by other instruments in finance (such as stocks).