Equity and Equity Investment

Equity, in finance and accounting, is the residual claim or interest of the most junior class of investors in an asset, after all liabilities are paid. If valuations placed on assets do not exceed liabilities, negative equity exists. In an accounting context, Shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the remaining interest in assets of a company, spread among individual shareholders of common or preferred stock.

At the start of a business, owners put some funding into the business to finance assets. Businesses can be considered to be, for accounting purposes, sums of liabilities and assets; this is the accounting equation. After liabilities have been accounted for, the positive remainder is deemed the owner's interest in the business.
This definition is helpful put into receivership or bankruptcy. Then, a series of creditors, ranked in priority sequence, have the first claim on the proceeds (e.g. asset sales), and ownership equity is the last or residual claim against assets, paid only after all other creditors are paid. In such a case, creditors may not get enough money to pay their bills, and nothing is left over to reimburse owners' equity. Thus owners' equity is reduced to zero. Ownership equity is also known as risk capital, liable capital and equity.

Contents.

1 Equity investments
2 Accounting
2.1 Book value
3 Shareholders' equity
4 Market value of shares
5 Real estate equity
6 References
7 See also
8 External links

Equity investments

Equity investments generally refers to the buying and holding of shares of stock on a stock market by individuals and funds in anticipation of income from dividends and capital gain as the value of the stock rises. It also sometimes refers to the acquisition of equity (ownership) participation in a private (unlisted) company or a startup (a company being created or newly created). When the investment is in infant companies, it is referred to as venture capital investing and is generally understood to be higher risk than investment in listed going-concern situations.

The equities held by private individuals are often held via mutual funds or other forms of pooled investment vehicle, many of which have quoted prices that are listed in financial newspapers or magazines; the mutual funds are typically managed by prominent fund management firms (e.g. Schroders, Fidelity Investments or the Vanguard Group). Such holdings allow individual investors to obtain the diversification of the fund(s) and to obtain the skill of the professional fund managers in charge of the fund(s). An alternative, usually employed by large private investors and pension funds, is to hold shares directly; in the institutional environment many clients who own portfolios have what are called segregated funds as opposed to, or in addition to, the pooled e.g. mutual fund alternative.