In this Unit we will cover: How to calculate equity
The Definition of Equity
What is equity?
Equity is the value of the shares issued by the company!
Defining Assets & Liabilities
Liability: An obligation that legally binds an individual or company to settle a debt.
Assets vs. Liabilities
Asset: An item of economic value owned by an individual or company to settle a debt
How do we get to equity?
Equity = Assets - Liabilities
In my example, the assets equaled to $60k while the liabilities equaled $20k.
Equity = 60k - 20k
Book Name here
In the end, the equity will come out as $40,000! With the given equity percentage of 40%, the investor will have their money back in approximately 4 years.
The equation to find equity (E = A - L) can help find the equity for various business plans furthermore determinng wether a business can be successful.