Equity

Equity: also known as Net Worth represents Shareholder’s Equity or Book Value.  It is NOT a measure of how much to  company is worth, but rather the accountant’s measure of all revenues less all expenses since the firm began operations.  If a company were to liquidate itself i.e. a bankruptcy they would sell all their assets, pay all their liabilities the remaining cash would be the Equity. In other words, Equity is the amount by which assets exceed liabilities in a company. If Net Income is positive, the Equity will increase during the period when the earnings are recorded. Similarly, if a company is showing losses, the Shareholder’s Equity on the Balance Sheet declines during the period.