Equity

Definition

  • The value of a property minus outstanding mortgage debt and other liens. Equity is the portion of your property that you have already paid for plus the appreciation, if any, in the value of the property since it was purchased.
  • A claim or interest in a business or asset that represents ownership. Some equity is traded as a security through shares on a stock exchange, while some equity is privately traded between two parties. For example, the shareholders of a corporation have equity in, and by extension partial ownership of, the corporation. Likewise, venture capitalists provide funds to startup companies in exchange for equity in the business.

Synonyms
closely held, backing, close corporation, ownership, assets, share, privately held, common interest, holding, stake

Related Terms and Acronyms

  • Asset-Backed Securities (ABS) Acronym, Very Important,
    • Securities backed by a pool of assets.
    Financial security made up of a bundle of assets.
  • Common Stock (CS) Acronym,
    • A security that allocates partial ownership in a corporation, but at a lower standing than preferred stocks.
  • Dividend Definition,
    • Distribution of earnings to shareholders. In credit unions, it's the money paid to members for deposits, similar to the interest banks pay to their customers for deposits.
  • Futures Definition,
    • Contracts to buy something in the future at a price agreed upon in advance. They first developed in the agriculture commodity markets but often involve foreign exchange, Eurodollar deposits and government bonds.
  • Holding Period Definition,
    • The length of time a capital asset is owned. Assets held 12 months or less are short-term; those owned more than 12 months are long-term properties.
  • Home Equity (HE) Acronym, Very Important,
    • The part of a home's value that the mortgage borrower owns outright; the difference between the fair market value of the home and the principal balances of all mortgage loans.
  • Home Equity Line of Credit (HELOC) Acronym, Very Important,
    • An open-ended loan, paid as revolving debt, that is backed by the equity in the property.
    Also known as a Home Line of Credit.
  • Home Equity Loan (HEL) Acronym, Very Important,
    • A loan that can replace or be an addition to the first mortgage. Typically used as a home improvement loan.
    Also known as an Equity Take Out (ETO).
  • Illiquid Asset Definition,
    • An asset that cannot be sold easily or in a timely manner for its full value.
  • Initial Public Offering (IPO) Acronym,
    • When shares of a corporation become available to the public for the first time.
  • Investment Definition,
    • Something you put your money into in order to make money.
  • Investment Canada Act (ICA) Acronym, Canada,
    • A Canadian law that gives the government power to deny foreign investments of "significant" size if they fail to provide a "net benefit to Canada."
  • Investments in Affiliates Definition,
    • A situation where an investor has a great deal of control over the operation and/or financial management of his or her investment.
  • Issuer Definition,
    • A legal entity that develops, registers, and sells securities including stocks, bonds and derivatives.
  • Mortgage-Backed Securities Definition, Important,
    • Securities backed by mortgage debt.
  • Preferred Stock Definition,
    • A type of security that signifies part ownership in a corporation and is given preferential treatment over common stocks.
  • Private Equity Definition,
    • Equity not traded on a stock exchange.
  • Ratio Definition,
    • Comparison of two figures used to evaluate business performance, such as debt/equity ratio and return on investment.
  • Return on Equity (ROE) Acronym,
    • A ratio that shows how profitable a company is when compared to shareholder equity.
  • Securities/Investment Dealer Definition,
    • One who acts as the agent for another party to buy and sell securities and other investments; also an underwriter.
  • Security Definition,
    • A tradable financial implement that represents ownership, the rights to ownership or debt.
    • Property designated as collateral.
    • A document stating ownership of a stock or bond.
  • Seed Funding Definition,
    • Money used to start a business.
  • Share Certificate Definition,
    • A certificate of deposit issued by a credit union that pays a specific dividend if held for a specific period. It's the credit union equivalent of a certificate of deposit. A penalty is usually assessed if all or any of the principal is withdrawn before maturity.
  • Sole Proprietorship Definition,
    • A business owned by an individual where no legal distinction is made between the business and the owner.
  • Startup Company Definition,
    • A recently founded company that works on new products and services.
  • Stock Definition,
    • A share of the ownership of a company.
  • Stock Insurance Company Definition,
    • An insurance company with multiple stockholders each owning shares in the corporation.
  • Swap Definition,
    • An agreement between two businesses to exchange commodities, payments or other financial products to reduce the risk of volatile market conditions or to obtain a better price or rate. For example, interest rate swaps, where floating rate interest is exchanged for fixed rate interest, protects a corporation against rises in rates or allows it to take advantage of a better rate. A cross-currency swap enables two parties to enter into an agreement in which one exchanges its currency for the other's to meet their separate requirements.
  • Venture Capital (VC) Acronym,
    • Financial capital given to startup companies.
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