1. What is Equity?

Equity represents the residual interest in the assets of an entity after deducting liabilities. For individuals, it's often called "net worth," while for businesses it's referred to as "owner's equity" or "shareholders' equity."

2. How Does the Calculator Work?

The calculator uses the fundamental accounting equation:

Where:

• \( Assets \) — All valuable resources owned (cash, property, investments, etc.)
• \( Liabilities \) — All debts and obligations owed (loans, mortgages, accounts payable, etc.)

Explanation: The equation shows what remains after all debts are paid from available assets.

3. Importance of Equity Calculation

Details: Calculating equity is essential for understanding financial health, securing loans, making investment decisions, and assessing business value.

4. Using the Calculator

Tips: Enter total assets and total liabilities in dollars. Both values must be positive numbers. The calculator will show the difference between them.

5. Frequently Asked Questions (FAQ)

Q1: What's considered a good equity position?
A: For individuals, positive equity is generally good. Businesses often compare equity to industry benchmarks.

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 calculate annually; businesses typically calculate quarterly with financial statements.

Q4: Does equity include intangible assets?
A: For businesses, yes (if properly valued). Personal equity calculations often exclude intangibles.

Q5: How does this differ from market capitalization?
A: Market cap is share price × outstanding shares. Equity is based on book values from financial statements.