Equity

In finance, equity refers to the ownership interest or residual claim in assets after deducting liabilities. It represents the net worth of an individual or a company and is calculated by subtracting the total liabilities from the total assets. In other words, equity is the portion of the total assets that is owned by the shareholders of a company. Shareholders are the owners of a company's equity and are entitled to a share of the company's profits as well as the right to vote on important matters related to the company's operations.

Common stock: A type of security that represents ownership in a company. Common stockholders have voting rights and may receive dividends, but their claims on the company's assets and earnings are subordinate to those of bondholders and preferred stockholders.

Preferred stock: A type of stock that pays a fixed dividend and has priority over common stock in the event of bankruptcy or liquidation. Preferred stockholders do not have voting rights but have a higher claim on the company's assets than common stockholders.

Retained earnings: The portion of a company's profits that is not paid out as dividends but is instead reinvested back into the business. Retained earnings increase the company's equity value and can be used to fund growth and expansion.

Additional paid-in capital: The amount of money that investors have paid for a company's stock that is in excess of the stock's par value. This represents the amount of equity that is generated by the sale of stock.

Treasury stock: Shares of a company's own stock that have been repurchased by the company. Treasury stock reduces the amount of outstanding shares and increases the value of each remaining share. It can also be reissued in the future or retired.

Stock options: A type of financial derivative that gives the holder the right, but not the obligation, to buy or sell a stock at a specific price within a certain period of time. Stock options can be used as a form of compensation for employees or as a way for investors to hedge their positions.