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Understanding Equity in Business: A Beginner’s Guide

When you hear the term “equity” in the context of business, it might sound a bit complex at first. But don’t worry! I’m here to break it down for you in a friendly and easy-to-understand way.

At its core, equity refers to ownership. In business, equity represents the value of an owner’s interest in a company after all liabilities (like debts) have been paid off. Think of it as what you truly own in a company. If you own shares of a company, you have equity in that business. This is important because owning equity can lead to profits through appreciation in the value of shares and dividends.