eli5:Please explain to me what is meant by term “equity” , if possible also explain with the help of an easy example , i am unable to understand from google also the example there are complicated
In: Economics
In accounting there are assets and liabilities.
Assets are things that companies have which have value. Computers, vehicles, etc.
Liabilities are things the company owes to other companies.
They’ll have a balance sheet where they have everything listed to know the status of the company. (There are more things but these are the basic.ones for this example)
The companies equity would be how much they would have if they suddenly had to pay off every other companies bills and then try to sell and liquefy all their assets.
So, if you were a company and suddenly had to pay off your mortgage, your loans, which was $10,000 but could sell all your equipment and tools and made $12,000. Your equity would be $2,000.
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