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Equity

What is equity?

Equity represents the funds made available to the company by its legal owners. Equity corresponds to what is known as net assets, which reflects that part of the assets that is financed by equity. Balance-sheet equity, or book equity, is calculated as the difference between the book values of all assets and the sum of all liabilities, untaxed reserves and deferred income. If liabilities exceed assets, the result is negative equity.

How is equity shown on the balance sheet?

The presentation of equity in the balance sheet varies depending on the legal form of the company. In the case of corperations, equity comprises share capital, capital reserves, retained earnings and net profit.

 

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