Equity Meaning: From Fairness to What You Actually Own

Equity meaning in five senses

1. Fairness. Treating people justly and impartially. "The judge was known for equity."
2. Ownership value. The value of an asset minus what is owed on it. Home equity and shareholders' equity both use this idea.
3. Shares in a company. Owning equity means owning part of a business. In the plural, equities is another word for stocks.
4. A branch of law. In countries with English-style legal systems, equity is a body of rules that grew to fix cases where strict common law gave unfair results, through remedies such as injunctions and trusts.
5. Fair outcomes for groups. In education, health and workplaces, equity means giving people the support they need so that outcomes can be fair, which may mean different help for different people.

Home equity: a worked example

Suppose you buy a flat for $250,000. You pay $50,000 upfront and take a mortgage for $200,000.

• On day one, your equity is $250,000 minus $200,000, which is $50,000.
• Five years later you have paid the loan down to $170,000 and the flat is now worth $280,000.
• Your equity is $280,000 minus $170,000, which is $110,000.

Equity grows when you pay down debt and when the asset rises in value. It shrinks if prices fall. If the home becomes worth less than the loan, you have negative equity, sometimes called being underwater.

Equity in a company

On a company's balance sheet, shareholders' equity equals total assets minus total liabilities. It is what would be left for owners if the company sold everything and paid every debt.

Startups often give employees equity, meaning a small ownership stake, instead of a higher salary. Investors who buy shares are equity investors, while lenders hold debt. Private equity refers to firms that buy companies not traded on a public stock exchange. A related word is portfolio, the mix of equities and other assets someone holds.

Equity versus equality

These two words are often discussed together. Equality usually means giving everyone the same thing. Equity usually means giving people what they need to reach a fair result, which may not be identical.

A common picture: three people of different heights try to watch a game over a fence. Equality hands each one the same box. Equity gives the shortest person more boxes so all three can see.

People disagree about how far institutions should go. Supporters say equity corrects real gaps in opportunity. Critics worry it can mean unequal treatment of individuals or judging outcomes rather than fair rules. This debate is part of discussions about DEI and diversity, and people on each side tend to share the aim of fairness and part ways on methods.

Examples in sentences

• After ten years of payments, they had built up enough equity to renovate the kitchen.
• The founder kept 60 percent of the equity and sold the rest to investors.
• Global equities fell sharply on fears of a slowdown.
• The school board voted for a plan to improve equity in access to computers.
• The court granted an injunction under its powers in equity.

Spelling, forms and mix-ups

Equity is spelled with a q followed by u, like equal. The adjective is equitable: an equitable split of the profits. Its opposite, inequity, means unfairness; do not confuse it with iniquity, which means wickedness. Also, "equity" in finance is not the same as "cash": you can have lots of equity in a house and very little money in the bank. For more money vocabulary, see the business and finance section.

Origin of the word

Equity came into English around the fourteenth century through Old French equité, which came from Latin aequitas, evenness or fairness. The same Latin root aequus gives us equal and equation. The legal sense grew in England, where a separate court applied principles of fairness. The financial sense, the owner's stake after debts, built on the legal idea of a right that equity courts would protect.