What Is Equity?

In finance the word equity has two main meanings:

  • A share or any other security which represents partial ownership of a firm
  • The value of a firm which has been contributed by the shareholders

In share terms, whenever you buy a share in a company you hold equity in that company. Companies can raise money by issuing equity, although this is usually deemed as being more expensive than using borrowed cash. Shareholder's Equity is denoted on the Balance Sheet in conjunction with liabilities to show the total amount of money injected into the company by shareholders. Venture Capital firms frequently purchase large amounts of equity (i.e. take ownership of a percentage of the company) in start-up companies as a way to inject money and to stake a claim on a percentage of the profits.

To learn more about this concept and become a master at valuation modeling, you should check out our Valuation Modeling Course. Learn more here.

Module 1: Introduction

Module 2: Valuation: The Big Picture

Module 3: Enterprise Value & Equity Value Practice

Module 4: Trading Comparables Introduction

Module 5: Trading Comps: The Setup

Module 6: Trading Comps: Spreading Nike (NKE)

Module 7: Trading Comps: Spreading Adidas (ADS.DE)

Module 8: Trading Comps: Spreading Lululemon (LULU)

Module 9: Trading Comps: Spreading Under Armour (UA)

Module 10: Trading Comps: Benchmarking and Outputs

Module 11: Precedent Transactions: Introduction

Module 12: Precedents: The Setup

Module 13: Spreading Tiffany & LVMH

Module 14: Spreading FitBit & Google

Module 15: Spreading Reebok & Adidas

Module 16: Spreading Jimmy Choo & Michael Kors

Module 17: Spreading Dickies & VF

Module 18: Valuation Wrap-Up

Module 19: Bonus: Non-GAAP Practice

Learn More Here

Related Terms

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