Equity: Difference between revisions

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1. ''Law''  
1. ''Financial reporting - balance sheet''.


A legal system that resolves disputes between persons by resort to principles of fairness and justness.
Amounts in the balance sheet of a company representing the book value of the interests of the shareholders.


It includes share capital, cumulative retained profits (or losses), and other reserves.


2.
It is also known as 'total equity' or 'shareholders' funds'.


The capital of a firm invested by those accepting the greatest degree of risk, for example the holders of ordinary shares (also known as common stock or common equity) in a company.


The book value of total equity is equal to the book value of the company's net assets (or net liabilities).


3.
These two items in a balance sheet always balance - so long as there are no errors.


Securities representing the rights of the risk capital investors in 2. above.
This is what is meant by a balance sheet "balancing".


For example, ordinary shares, also known as common stock.


2. ''Financial reporting''.


4. ''Financial reporting''.
Comparable amounts for financial reporting entities that are not companies.


Amounts in the financial report of a company representing the book value of the interests of the shareholders in 2. above.


It includes share capital, cumulative retained profits, and other reserves.
3. ''Capital investment.''


It is also known as 'total equity' or 'shareholders' funds'.
The capital of a firm invested by those accepting the greatest degree of risk, for example the holders of ordinary shares (also known as common stock or common equity) in a company.


The book value of total equity is equal to the book value of the company's net assets.


4. ''Securities.''


5. ''Financial reporting''.
Securities representing the rights of the risk capital investors in 3. above.


Comparable amounts for financial reporting entities that are not companies.
For example, ordinary shares, also known as common stock.




6. ''Banking and bank regulation''.
5. ''Banking and bank regulation''.


Abbreviation for common equity.
Abbreviation for common equity.




7.
6. ''Net asset value.''


The net value of an asset, after deducting any debt relating to it or secured on it.
The net value of an asset, after deducting any debt relating to it or secured on it.
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:<span style="color:#4B0082">'''''Example: Equity and Negative equity'''''</span>
:<span style="color:#4B0082">'''''Equity and Negative equity'''''</span>


:A house is worth EUR 400k.
:A house is worth EUR 400k.
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:The Equity in the house is the difference between the current value, and any loans secured over it. This is also EUR 100k.
:The Equity in the house is the difference between the current value, and any loans secured over it.
:This is also EUR 100k.




:If the value of the house falls to EUR 250k, the borrowing now exceeds the value of the asset.
:If the value of the house falls to EUR 250k, the borrowing now exceeds the value of the asset.


:This is 'negative equity' (of EUR 50k).
:This is 'negative equity' (of EUR 50k = 250k - 300k).




7. ''Law''.
A legal system that resolves disputes between persons by resort to principles of fairness and justness.
8. ''Ethics - governance''.
Fair treatment between different individuals and different groups.
:<span style="color:#4B0082">'''''Equity & inclusion are priority for investors'''''</span>
:“Diversity, equity and inclusion is emerging as a priority topic for investors, with some of the world’s largest asset managers reporting increased engagement with portfolio companies in this area."
:''FitchRatings - November 2021.''
:<span style="color:#4B0082">'''''Equity and equality'''''</span>
:"Equity is often harder to give than equality and always needs more thought.  A few cases...
:At its simplest, equality could be having a townhall and inviting everyone.  Equity means reserving a seat for me near the front, because my eyes are so bad I can’t read the presentation without sitting close to the screen.
:Treating people equally might mean allowing anyone to apply for open positions in Treasury.  It fails to acknowledge that some people are more likely than others to apply for a promotion, even if they are both equally good.  We have also seen that cultural background can have a disproportionate influence on how well people perform at interview.  Equity means taking the time to identify who might be good in a job, and encouraging them to apply.  It can also mean offering interview practice and training to selected groups."
:''Frances Hinden FCT, Group Treasurer, Shell.''




== See also ==
== See also ==
* [[An introduction to equity capital]]
* [[An introduction to equity capital]]
* [[Asset manager]]
* [[Assets]]
* [[Assets]]
* [[Balance]]
* [[Balance sheet]]
* [[Blue chip]]
* [[Blue chip]]
* [[Book equity]]
* [[Book value]]
* [[Book value]]
* [[Capital]]
* [[Capital]]
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* [[Capital structure]]
* [[Capital structure]]
* [[Common equity]]
* [[Common equity]]
* [[Common Equity Tier 1]]
* [[Common law]]
* [[Common law]]
* [[Common stock]]
* [[Common stock]]
* [[Compound instrument]]
* [[Compound instrument]]
* [[Cost of equity]]
* [[Debt]]
* [[Debt]]
* [[Debt equity ratio]]
* [[Debt for equity swap]]
* [[Debt for equity swap]]
* [[Debt to equity ratio]]
* [[DEI]]
* [[Diversity]]
* [[Diversity, equity and inclusion]]
* [[Dividend]]
* [[Dividend growth model]]
* [[Dividend growth model]]
* [[Economic value of equity]]
* [[Entity]]
* [[Entity]]
* [[Equality]]
*[[Equitable]]
* [[Equity accounting]]
* [[Equity beta]]
* [[Equity capital]]
* [[Equity capital market]]  (ECM)
* [[Equity cost of capital]]
* [[Equity cost of capital]]
* [[Equity in Diversity, equity and inclusion]]
* [[Equity instrument]]
* [[Equity instrument]]
* [[Equity investments]]
* [[Equity investments]]
* [[Equity market]]
* [[Equity method]]
* [[Equity method investment]]
* [[Equity risk]]
* [[Equity risk]]
* [[Equity risk premium]]  (ERP)
* [[Equity security]]
* [[Equity share]]
* [[Equity structured deposit]]
* [[Equity structured deposit]]
* [[Equity swap]]
* [[Equity swap]]
* [[Financial markets]]
* [[Fitch]]
* [[General equity risk]]
* [[Green equity]]
* [[Hybrid capital]]
* [[Inclusion]]
* [[Integral equity method investment]]
* [[Kay Review]]
* [[Kay Review]]
* [[Liabilities]]
* [[Liabilities]]
* [[Liabilities and equity]]
* [[Liabilities and equity]]
* [[Market/book ratio]]
* [[Market/book ratio]]
* [[Member]]
* [[Mezzanine]]
* [[Mezzanine]]
* [[Mortgage]]
* [[Mortgage]]
* [[Negative equity]]
* [[Net assets]]
* [[Net assets]]
* [[Net worth]]
* [[Net worth]]
* [[Non-equity security]]
* [[Non-integral equity method investment]]
* [[NOSH]]
* [[Ordinary shares]]
* [[Ordinary shares]]
* [[Own funds]]
* [[Own funds]]
* [[Private equity]]
* [[Private equity]]  (PE)
* [[Private equity house]]
* [[Quasi-equity]]
* [[Reporting entity]]
* [[Reporting entity]]
* [[Reserves]]
* [[Reserves]]
* [[Return on equity]]
* [[Return on equity]] (ROE)
* [[Risk]]
* [[Risk]]
* [[Share]]
* [[Share]]
* [[Share capital]]
* [[Share capital]]
* [[Shareholder]]
* [[Shareholder value]]
* [[Shareholders’ funds]]
* [[Shareholders’ funds]]
* [[Shareholders’ wealth]]
* [[Specific equity risk]]
* [[Stakeholder]]
* [[Statement of changes in equity]]
* [[Statement of changes in equity]]
* [[Statement of shareholders' equity]]
* [[Stock]]
* [[Stock]]
* [[Total Loss Absorbing Capacity]]
* [[Total Loss Absorbing Capacity]]
* [[Total return swap]]
* [[Total return swap]]


[[Category:Compliance_and_audit]]
[[Category:Corporate_finance]]
[[Category:Corporate_finance]]
[[Category:Compliance_and_audit]]

Latest revision as of 21:49, 5 November 2024

1. Financial reporting - balance sheet.

Amounts in the balance sheet of a company representing the book value of the interests of the shareholders.

It includes share capital, cumulative retained profits (or losses), and other reserves.

It is also known as 'total equity' or 'shareholders' funds'.


The book value of total equity is equal to the book value of the company's net assets (or net liabilities).

These two items in a balance sheet always balance - so long as there are no errors.

This is what is meant by a balance sheet "balancing".


2. Financial reporting.

Comparable amounts for financial reporting entities that are not companies.


3. Capital investment.

The capital of a firm invested by those accepting the greatest degree of risk, for example the holders of ordinary shares (also known as common stock or common equity) in a company.


4. Securities.

Securities representing the rights of the risk capital investors in 3. above.

For example, ordinary shares, also known as common stock.


5. Banking and bank regulation.

Abbreviation for common equity.


6. Net asset value.

The net value of an asset, after deducting any debt relating to it or secured on it.

For example, the value of a residential property, after deducting the amount of a mortgage borrowing secured on it.

If the value of the borrowing exceeds the value of the asset, the situation can be described as 'negative equity'.


Example: Equity and Negative equity
A house is worth EUR 400k.
A borrowing of EUR 300k is secured by a mortgage over the house.
The net worth is the difference between the value of the the house (asset) EUR 400k and the borrowing (liability) EUR 300k
400k - 300k = EUR 100k


The Equity in the house is the difference between the current value, and any loans secured over it.
This is also EUR 100k.


If the value of the house falls to EUR 250k, the borrowing now exceeds the value of the asset.
This is 'negative equity' (of EUR 50k = 250k - 300k).


7. Law.

A legal system that resolves disputes between persons by resort to principles of fairness and justness.


8. Ethics - governance.

Fair treatment between different individuals and different groups.


Equity & inclusion are priority for investors
“Diversity, equity and inclusion is emerging as a priority topic for investors, with some of the world’s largest asset managers reporting increased engagement with portfolio companies in this area."
FitchRatings - November 2021.


Equity and equality
"Equity is often harder to give than equality and always needs more thought. A few cases...
At its simplest, equality could be having a townhall and inviting everyone. Equity means reserving a seat for me near the front, because my eyes are so bad I can’t read the presentation without sitting close to the screen.
Treating people equally might mean allowing anyone to apply for open positions in Treasury. It fails to acknowledge that some people are more likely than others to apply for a promotion, even if they are both equally good. We have also seen that cultural background can have a disproportionate influence on how well people perform at interview. Equity means taking the time to identify who might be good in a job, and encouraging them to apply. It can also mean offering interview practice and training to selected groups."
Frances Hinden FCT, Group Treasurer, Shell.


See also

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