Equity is an ownership interest in a company or other entity. Public equity is commonly represented by stock shares; private equity gives an investor part of a start-up without being traded on a public exchange. section 1.2.1 section 12.0
Track equity through several related ideas:
- A share is a countable ownership unit, while a stock represents the company’s total ownership interest available to investors. section 1.2.1
- Shareholder equity is what owners would receive after selling assets and paying liabilities; excessive liabilities can signal serious financial trouble. section 2.1.2
- Equity returns may come from price appreciation or dividends, but market conditions, politics, economic news, taxes, and inflation affect the result. section 1.2.1
Public and private ownership
Buying one Apple share creates a very small public-company ownership position. Investing money in a start-up creates private equity instead: the investor receives part of the company, but that ownership is not traded on a public exchange. A programmer evaluating either position should compare potential growth with liquidity, dilution, debt, and alternative returns rather than treating ownership alone as a guaranteed gain. section 1.2.1 section 12.0 section 2.1.2
Assets = Liabilities + Shareholders’ equity
Use the balance-sheet identity to connect ownership value with what a company owns and owes. section 2.1.2
