Equity

Equity is the owner’s claim on the assets of a business after all liabilities are paid.

Explanation:
Equity is also known as owner’s equity (for sole proprietors) or shareholders’ equity (for corporations). It’s calculated as:
Equity = Assets – Liabilities

Example:
If a business has $100,000 in assets and $60,000 in liabilities, the equity is $40,000.

Importance:
Equity shows how much value belongs to the owners and is crucial for investors and stakeholders.

Common Confusion:
Equity is not cash—it’s the net value after debts are deducted.