Equity

Equity in a business is the company's debt to shareholders. You can say that the equity belongs to the shareholders' in a company.

Reported equity does not need to correspond to the fair value of the equity, usually it is not so when it comes to small private limited companies. The use of the precautionary principle leads to assets valued to the lowest of current value or cost and not at fair value. Equity in a corporation consists of restricted equity and non-restricted equity.

The share capital is a component of the equity. The share capital is the nominal value of all issued shares in the company. The nominal value is determined when shares are issued in a company. The share capital may increase but never decrease below the established levels of share capital under the law. The share capital increase with a new share issue and a bonus issue. Equity is calculated as assets minus liabilities.