The residual value of a company's assets after all outside liabilities (other than to shareholders) have been allowed for. In a mortgage, or in a hire purchase contract, equity is the amount left for the borrower if the asset concerned is sold and the lender repaid. The equity in a company under liquidation is the property of holders of ordinary shares, hence these shares are popularly called equities. Because equity yields and prices, although fluctuating, have risen as the value of money has fallen, they have proved better long-term investments than fixed-interest stocks in the period since Second World War.
|Reference: The Penguin Dictionary of Economics, 3rd edt.|