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equity

Definition

In the context of entrepreneurship and starting your own business, equity represents ownership interest in a company, which can be expressed in terms of stock or shares. It indicates the value of an owner's stake in the business, after all debts and liabilities have been subtracted.

Analogy

Think of equity like having a slice of a large pizza. If you start a business and it's the whole pizza, every time you bring in an investor for financial support, you give them a piece of your pizza. The size of their slice depends on how much they've invested compared to the total value of the business - that's their equity.

Related terms

Capital: The wealth in the form of money or other assets owned by a person or organization or available for a purpose such as starting a company or investing.

Shareholder: An individual or institution owning shares in a company and therefore having partial ownership of it.

Valuation: The process of determining the present value of a company or asset, taking into account factors like future earnings potential and market conditions