Define: Equity

UK Accounting Glossary

Definition: Equity


Quick Summary of Equity


A description applied to the ordinary share capital of an entity.



What is the dictionary definition of Equity?

Dictionary Definition


  1. Ownership, especially in terms of the net monetary value of some business.
  2. legal A legal tradition that deals with remedies other than (monetary) relief, such as injunctions, divorces and similar actions.
  3. legal Value of property minus liens or other (encumbrances).

Represents ownership interest in a firm. Also the residual dollar value of a futures trading account, assuming its liquidation at the going market price.


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Full Definition of Equity


In business, equity refers to the value of ownership. The term equity has a connotation of partial ownership, either because of claims by other owners or the pledge of assets as debt collateral, or both. This meaning is encapsulated in the fundamental accounting equation, which defines owners’ equity as equal to assets minus liabilities. Partial ownership is implied in the use of equity as a synonym for publicly traded stock, as in the term equity market. Residual ownership after subtracting the value of debt is illustrated by the term homeowner’s equity. An important measure of the financial performance of an equity investment is return on equity (ROE), defined as net income divided by owners’ equity. In economics, equity is used as a term for fairness. In modern American law, the term equity has a meaning derived from this economic usage that relates to the type of relief sought by a plaintiff, which is classified as either legal or equitable.


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Examples of Equity in a sentence


An equity joint venture is a company put together by multiple entities, each holding shares as agreed in the formation.
Because of their large amount of debt, the owners have very little equity in that company.


Synonyms For Equity


fairness, justice, capital, equality, share


Cite Term


To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
https://payrollheaven.com/define/equity/
Modern Language Association (MLA):
Equity. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. February 25, 2020 https://payrollheaven.com/define/equity/.
Chicago Manual of Style (CMS):
Equity. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/equity/ (accessed: February 25, 2020).
American Psychological Association (APA):
Equity. PayrollHeaven.com. Retrieved February 25, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/equity/

Definition Sources


Definitions for Equity are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • BusinessDictionary.com
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 23rd December 2018.