Term: EQUITY

That portion of share capital which carries risk, and shares in profits through dividends that are dependent on profitability. Ordinary shares are often called equity shares, and other types of shares which carry less risk, such as convertible or participating preference shares are known as “near-equity”. Equity is the share capital and reserves of the company- which is the same as its net assets (net of liabilities). You should be careful because in many instances the book value of assets such as stock and real estate is very different from the market value.

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