What is Equity Investment?| What are assets and liabilities?

Q: What is equity investment?

Ans: Equity means the assets of a company minus its liabilities. Equity investment means buying shares of a company.

What are assets and liabilities?

Assets is the money or property value that you have or own. Liability is different types of loan, pending payments, etc that you owe to people. So equity shows people how much worthy a company is. It can also be said as the net worth of the company. 
           If you register a company to start a business, consider your company has 2 lacs share which will be divided among you and your partner. This shares can be sold in the stock market to create more investment for your company. So the investors in the stock market buy your shares at the market price and each investor now owns a certain percent of the equity in the company and the money invested by the investors will be your assets.
                  Example: If you and your friend want to start a company for making household goods, you are going to need investment. Let's say you require 10 lacs for starting the business, you have 4 lacs (2 lacs each)  for investment which is your asset and another 6 lacs is given by the bank which is your liability. So your total equity will be:

• Equity=Asset of the company-It's liability.

So in this condition your equity will be,

• Equity=10,00,000-6,00,000  

                  =4,00,000

This is the initial equity of your company. As the company will grow there may be different factors affecting your assets and liabilities. If your asset increases your equity will go up and your company will grow and the price of your company share will grow up and in case your liabilities increases, vice versa can happen. 

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