What is equity?

Definition of equity

Equity is the value of shareholders' investment in a limited company.

When an individual buys shares in a limited company, he or she is said to be buying equity in that company.

If a limited company raises some money to spend by selling shares, rather than borrowing the money from the bank or other providers, the company is said to be 'financing by equity'.

Crowdfunding in which investors buy shares in the business that's looking for money is called 'equity crowdfunding'.

Public companies (that is companies whose shares can be bought and sold on the open market by anyone) may say the value of their equity has 'gone up' or 'gone down'. What they mean is that people are prepared to pay more or less to buy their shares, and this can be for various reasons, such as a new product release, or a scandal concerning the company.

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FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.