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Definition of Equity

Equity refers to the ownership interest or the residual claim that shareholders have in a company's assets after deducting all its liabilities. It represents the portion of a company's value that is owned by its shareholders.

What is an Equity?

An equity is the value that remains for the shareholders once all debts and obligations have been settled. It is commonly known as "shareholders' equity," "owner's equity," or "equity capital."

Equity serves as a measure of the company's net worth and is a key indicator of the company's financial health and stability.

How to calculate Equity?

Equity is a part of a company's balance sheet and is calculated as the difference between the total assets and total liabilities. The equation is as follows:

Ekuitas = Total Aset - Total Kewajiban

The equity section of a company's balance sheet includes various components like common stock, preferred stock, additional paid-in capital, retained earnings, and other comprehensive income.

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