Equity

Tax Glossary Definition

Equity

Equity represents the ownership interest held by shareholders in a company, typically in the form of common or preferred shares. It signifies the residual claim on the company’s assets after all liabilities have been settled and grants shareholders certain rights, including voting privileges, participation in profits through dividends, and a share in the company’s net worth.

Example: When an investor purchases equity shares of a company, they acquire partial ownership and may receive dividends based on the company’s profitability.

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