key term - Owners’ equity

Definition

Owners' equity represents the owner's claim on the assets of a business, essentially the amount of money that would be returned to owners if all of the company's assets were liquidated and all its debts paid off. It is calculated as the business's total assets minus its total liabilities.

Related terms

Assets:

These are resources owned by a business that have economic value, expected to benefit future operations.

Liabilities:

These are financial obligations or debts that a business owes to others, which must be paid back.

Balance Sheet:

A financial statement that displays a company's financial position at a specific point in time, showing assets, liabilities, and owners' equity