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| The_SoulStealer
Posts: 2,263 Status: Lord Karma: +189 [+1] [-1]   |
Subject: There is no fixed percentage defining equity | |||||
| Equity is defined as (in accounting) the residual or remaining interest in a business after assets have been used to pay off all liabilities. In your example, the house worth 1m is your asset, and your loan of 0.9m is your liability, therefore you have an equity value of 0.1m Equity is not therefore equal to capital. Capital comprises all the funds used to run the business in the long term; long-term debt/loans and shares/reserves. The basic definition remains though, equity will be whatever is left after all liabilities have been paid off. |
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