Debt Dictionary


Investment Dictionary -> Equity

Equity can refer to interest in assets, distributed among shareholders in a particular corporation. Alternatively, equity points to real estate equity which stands for investments made through a private equity real estate fund, collecting capital from the individual investors. In the first case, ownership equity encompasses interest on assets after the liabilities have been deducted. Simply put, this is the total assets minus all liabilities. In case that debt exceeds the amount of assets, the company has negative ownership equity.

The term can be spotted in many variations among which: net assets, net worth, liable capital, and risk capital. It should be noted that equity stands apart from book value. The book or carrying value covers only the tangible assets and excludes goodwill and intangible assets. In contrast, the ownership equity comprises of tangible and intangible assets such as share capital, retained earnings, preferred and treasury stock, brand name, and reputation, among others. If the entity is owned by shareholders, the ownership entity is referred to as the shareholders` equity. Similarly, the equity stands for the total assets minus the liabilities. The shareholders have equal shares in the company in case that they are of the same class.

Private equity real estate was established as a separate asset class during the 21 century. The last decade has witnessed considerable interest in this type of investment instrument. In general, real estate equity refers to investments made by means of private equity real estate fund or the so called collective investment scheme. The latter refers to the joint investment of money in order to access a wider scope of investment instruments. In the typical case, these investments have a life span of ten years. This timeframe covers two to three year investment periods which entail the acquisition of property. In addition, there is a holding period which comprises of management of the assets and their ultimate sale.

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