This figure will often appear on your business’s balance sheet. It’s sometimes called “stockholders’ equity” or “shareholders’ equity” to distinguish it from other uses of the word equity.
Assets are everything that your company owns. For instance, if you’ve purchased a building for your business, that’s an asset. If you own ten computers for your business, those are assets.
Liabilities are all the costs that your company owes. Salaries, accounts payable, and rent are all liabilities.
Positive equity is when a company’s assets outweigh its liabilities.
Negative equity is when a company’s assets cannot cover its liabilities. This means the company will be seen as a high-risk investment.