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equity

EK-wuh-tee /ˈɛkwɪti/

nounB2GMATIELTSUPSC

FormalBusinessLegal

The value of the shares issued by a company; the quality of being fair and impartial.

In business, equity is ownership. If you have 10% equity, you own 10% of the company's value.

The story behind the word. From the Latin 'aequitas,' meaning 'evenness' or 'fairness.' In English law, 'Equity' became a system of justice that looked at the spirit of the law rather than just the strict letter, ensuring a 'fair' outcome.

Word relationships

ownership: Ownership is the general state of possessing something; equity is the specific financial value of that possession in a company.
shares: Shares are the units into which equity is divided.

debt: Debt is money owed to others; equity is the value that remains for the owners after debts are paid.

Commonly confused with

equality: Equality means being the same; equity in a social context means fairness, and in business means ownership.

Word family

equitable (adjective): Fair and impartial.

Collocations

private equity
brand equity
equity stake
sweat equity

Idioms & expressions

sweat equity

Example sentences

"Equity is a roguish thing." A legal maxim about fairness.
"The startup offered the new engineer a competitive salary plus 0.5% equity in the firm." Discussing employee compensation.

Memory hook

Equity sounds like 'equal.' It's about your 'equal' share of the company's value. Equity = Your piece of the pie.

When not to use

Don't confuse equity with 'equality.' Equality is everyone getting the same; equity is everyone getting what is fair or owning a piece of the pie.

Fun facts

The term 'sweat equity' refers to the value added to a project by the hard work of the people involved, rather than by financial investment.