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What is Equity? Equity is a term used in accounting, in real estate and home-ownership, in investing, as well as in startup financing and valuation. The meaning of the term equity is very similar in the various areas where it is used, so it will be good to review all four of these to get the best understanding. In accounting, equity is a term that you will find on the balance sheet. What you own is on the left: assets. What you owe is on the right: liabilities and equity. Equity is the book value of the shareholder capital. Heres an example. A company in the manufacturing industry has a machine that it bought for $1 million as its asset, what it owns. This asset is financed through a bank loan of $800.000, money that is owed to the bank, and through equity (shareholder capital) of $200.000, that is owed to Jane, the owner of the business. The accounting equation tells you that assets equal liabilities plus equity. That also means that equity equals assets minus liabilities. Equity on