1. What is Equity?

Equity represents the residual value to owners after liabilities are subtracted from assets. For individuals, it's often called "net worth," while businesses refer to it as "owner's equity" or "shareholders' equity."

2. How Does the Calculator Work?

The calculator uses the fundamental accounting equation:

Where:

• \( Assets \) — Everything owned that has value (cash, property, investments)
• \( Liabilities \) — All debts and obligations (loans, mortgages, accounts payable)

Explanation: The equation shows what remains after all obligations are paid from available resources.

3. Importance of Equity Calculation

Details: Equity measurement is crucial for assessing financial health, securing loans, making investment decisions, and evaluating business viability.

4. Using the Calculator

Tips: Enter asset and liability values in dollars. Both values must be positive numbers. The calculator will automatically compute the equity.

5. Frequently Asked Questions (FAQ)

Q1: What's considered a good equity value?
A: For individuals, positive and growing equity is ideal. Businesses typically aim for equity that's 25-50% of total assets.

Q2: Can equity be negative?
A: Yes, when liabilities exceed assets. This indicates financial distress for individuals or businesses.

Q3: How often should I calculate my equity?
A: Individuals should track annually, while businesses typically calculate monthly or quarterly.

Q4: Are there different types of equity?
A: Yes, including owner's equity, stockholders' equity, home equity, and brand equity.

Q5: How does equity differ from liquidity?
A: Equity measures net worth while liquidity measures ability to meet short-term obligations.