# Word of the Week 'Equity' ##### What Is Equity?

Equity is typically referred to as shareholder equity (also known as shareholders' equity) which represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company's debt was paid off.

Equity is found on a company's balance sheet and is one of the most common financial metrics employed by analysts to assess the financial health of a company. Shareholder equity can also represent the book value of a company.

There are various types of equity that extend beyond a corporation’s balance sheet. In this article, we’ll explore the different types of equity including how investors can calculate a corporation’s equity or net worth.

##### KEY TAKEAWAYS
• There are various types of equity, but equity typically refers to shareholder equity, which represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company's debt was paid off.

• We can think of equity as a degree of ownership in any asset after subtracting all debts associated with that asset.

• Equity represents the shareholders’ stake in the company. The calculation of equity is a company's total assets minus its total liabilities.

##### The Formula for Shareholder Equity Is

Shareholders'~equity = Total~Assets - Total~Liabilities Shareholders′ equity=Total Assets−Total Liabilities

##### How to Calculate Shareholder Equity

The balance sheet holds the basis of the accounting equation, which is as follows:

Assets = liabilities + shareholder~equity Assets=liabilities+shareholder equity

However, we want to find the value of equity, which can be done as follows:

1. Locate the company's total assets on the balance sheet for the period.

2. Locate total liabilities, which should be listed separately on the balance sheet.

3. Subtract total