Equity

Glossary

Banking

Equity

Owning equity i.e. shares in a company confers pro rata ownership in that company, as well as -- in the vast majority of cases -- the right to vote at shareholders’ meetings on items such as management compensation, corporate strategy and corporate event activity such as mergers, takeovers or spin-offs. Equity holders have a right to receive a share of the company’s profits if the company opts to pay a dividend. Shareholders’ equity – paid-in capital plus retained earnings – acts as a buffer against losses. In an accounting context, equity sits on the liabilities side of the balance sheet. Total liabilities plus equity must equal total assets.

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