Equity in a business context refers to the residual interest or ownership that shareholders or owners have in a company after all debts have been paid. It is represented on the balance sheet as the total of share capital, retained earnings, and other reserves. For example, if a company’s total assets amount to $1,000,000 and its liabilities are $600,000, the equity would be $400,000. Equity is significant as it shows the value that would be returned to shareholders if all the company’s assets were liquidated and debts settled.

In accounting terms, equity is calculated as Equity = Assets - Liabilities. It is an essential figure for investors and stakeholders as it reflects the net worth of the company. Common examples of equity include common stock and retained earnings for corporations, or owner's equity in the case of small businesses. Sentences using "equity" might include: "An increase in the company’s equity indicates growing profitability and solid financial health," or "The firm’s equity position strengthened due to retained earnings from the profitable fiscal year."