Ownership equity

From Free net encyclopedia

In finance and accounting, ownership equity, commonly known simply as equity, but also as risk capital or liable capital, is the difference in value between the assets and the claims on them (liabilities), which accrues to the owner(s). In case the owners are shareholders, it is usually called shareholders' equity.

In a bankruptcy court, creditors have the first claim on assets, and ownership equity is the last or residual claim against assets, paid only after all other creditors are paid.

For example, in real estate the owner's equity in a property is the difference between the market price of a property and the owner's mortgage debt.

Equity can be a source of assets, either through contributed capital (the contribution of capital resources, i.e., assets from the owners) or retained earnings (when the business increases assets through earning activities). These retained earnings can then be distributed to the owners (through equity draws or dividends depending on the corporate structure) or kept in the business.

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Home Equity

A home equity is a loan that is secured against your homes equity. Normally lenders lend upto about 75% of your homes equity. Your homes equity is measured upon how much of your mortgage remains, and how much the home/property is valued at. Home equity loans run from between 10 to 25 years. <ref>"Basics of Home Equity" - Adam Jackson</ref>

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