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Equity vs Shares: Definitions, Formulas, Context


📖 DEFINITIONS


EQUITY

This is the value shareholders own in a company; It’s calculated by subtracting liabilities from total assets; Equity shows the portion of the company owned by shareholders;


→ Also called "shareholders' equity," it shows what’s left after debts are paid.


SHARES

They are units of ownership in a company; They represent a fraction of the company's equity;


→ Shares are traded in markets, and their value changes based on performance and market conditions.


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🔢 FORMULAS


EQUITY = Total Assets – Total Liabilities


Value of Shares (Basic Formula) = Total Company Equity / Total Number of Shares Outstanding


Value of Shares (Market Price) = Market Price per Share × Number of Shares Owned


Value of Shares (Earnings-Based) = Price to Earnings (P/E) Ratio × Earnings Per Share (EPS)


Value of Shares (Dividend Discount Model) = Dividend per Share / (Discount Rate – Dividend Growth Rate)


Value of Shares (Net Asset Value) = (Total Assets – Total Liabilities) / Total Number of Shares Outstanding


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⚙️ CONTEXT


EQUITY

→ Equity appears in the "Shareholders' Equity" section of the balance sheet; It shows the value owners hold after paying off liabilities;

→ Equity grows through profits, investments, or asset value increase.


SHARES

→ Companies issue shares to raise capital; Each share equals part of the company’s equity;

→ Shares give owners rights to profits (dividends) and sometimes voting power.


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📊 MORE


EQUITY

Common Equity: Ownership for regular shareholders; They have voting rights and may get dividends, but are last in asset claims if the company fails;

Preferred Equity: Owners get fixed dividends and priority over common shareholders, but usually lack voting rights.


SHARES

Common Shares: Most common type of shares with voting rights and potential dividends;

Preferred Shares: Fixed dividends and priority over common shares, but usually no voting rights.


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💡 SUMMARY


EQUITY → The ownership stake shareholders have in a company after liabilities are deducted;


SHARES → Units of company ownership that represent a part of the equity; Shares can be common or preferred, each offering different benefits;


✦ Equity shows total shareholder value, while shares represent individual units of that ownership.






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