What is Equity

What is Equity? Equity is a term used in accounting, in real estate and home-ownership, in investing, as well as in startup financing and valuation. The meaning of the term equity is very similar in the various areas where it is used, so it will be good to review all four of these to get the best understanding.
In accounting, equity is a term that you will find on the balance sheet. What you own is on the left: assets. What you owe is on the right: liabilities and equity. Equity is the book value of the shareholder capital. The accounting equation tells you that assets equal liabilities plus equity. That also means that equity equals assets minus liabilities.
Equity on a balance sheet goes up when a company is profitable: the net income for the year gets added to equity through retained earnings. Equity on a balance sheet goes down when the company is loss-making (losses “eat up” the equity), or when the company pays a dividend to its shareholders.
Equity in home-ownership works very similar to equity on the balance sheet. What we own is on the left: the house worth $500.000. What we owe is on the right: $400.000 of mortgage loan from the bank, and the owner of the house, Jim, has $100.000 of equity in the house. Equity in home-ownership is what a home is worth minus how much you owe to the bank.
Just like equity on the balance sheet of a company can go up or down, the equity that you have in your home can go up or down. If Jim is paying down the mortgage on his house by $50.000, then the amount of the loan outstanding will decrease and his equity in the house will increase. If the market value of the house increases, then Jim’s equity in the house will increase. Remember that equity is what a home is worth minus how much you owe to the bank. If the market value of the house decreases, then Jim’s equity in the house will decrease, or even become negative. Jim will need to have a conversation with the bank to make a remediation plan to get back to positive equity, or in the worst case scenario Jim might lose the ownership of the house and the bank will need to take a partial write-off of its outstanding loan.
Investing in #equity. Remember the example of the small manufacturing business that owned a machine, had a loan from a bank, and equity from one shareholder. What if we make that a big manufacturing business that owns lots of machines at different sites totaling $1 billion, has many loans outstanding totaling $800 million that are publicly traded in the bond market, and has many different shareholders as the certificates of ownership, the equity, is traded publicly as well. As an investor, you have the choice of buying bonds (which would have a predetermined interest rate, and has the machines as collateral), or the choice of buying stocks (which are perceived as having more downside risk as well as more upside potential). Invest in debt, or invest in equity.
Want to track the total return on your stock portfolio (share price increase/decrease plus dividends received), then check out the easy-to-use online portfolio tracker called Sharesight: www.sharesight.com/thefinance...
Equity in a startup company. How do you put a “price” on what is essentially so far just an idea, that still has to be developed and will find many ups and downs along the way? The company does not have any assets, liabilities and equity yet. The financing and valuation depend on the estimate of the revenue, profit and cash flow that the business idea might bring in the future. A good way to learn about startup companies in the tech field is the comedy series “Silicon Valley”. What happens if the app you are developing turns out to have a great compression algorithm, you are courted by investors ready to fund you, and your friends and roommates suddenly become your employees while you become the CEO?
Having equity can be a great thing. Equity has potential risks as well as potential rewards. The term equity is used in accounting, in home-ownership, in investing, and in start-up financing and valuation. Probably the easiest metaphor to remember is equity in home-ownership: what a home is worth minus how much you owe to the bank.
Philip de Vroe (The Finance Storyteller) aims to make strategy, #finance and leadership enjoyable and easier to understand. Learn the business and accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better #investing decisions. Philip delivers financetraining in various formats: KZbin videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!

[@TheFinanceStoryteller]

Enjoyed this video explaining "Equity"? Then please subscribe to the channel, and watch my video on the Accounting Equation next: kzbin.info/www/bejne/hYrUnWqPbrOheMk

[@jamalawais1306]

Hi a video on de merits of interest

[@govindagovindaji4662]

I think I now understand equity a bit more, yet certainly did not understand the "according to my math" on the percent of ownership. The CEO only had a 10% stake. Between the other 3, they had 9%. And that one other dude 5% for let's combine for a total of 14%. 100 - 14 is 86. Where did you come up with the number 76%? Are we assuming by this, that he (as owner) has his original 10 plus the difference b/w that 10 and 86?

[@TheFinanceStoryteller]

@@govindagovindaji4662 Have you seen the comedy series Silicon Valley, that I reference? The CEO is Richard Hendricks, the owner of the incubator (house) Erlich Bachman. I think my math is right for calculating Richard's equity position, but it does change through the various seasons of the series....

[@chellyvino]

So frickin simple. This is what I was struggling to understand in my accounting and business finance classes.

[@TheFinanceStoryteller]

Great to hear that the video was helpful! I think you will also enjoy the related video on the "statement of changes in equity" which gives an overview of what flows into and out of equity on the balance sheet: kzbin.info/www/bejne/rmTFm6Vpf7WYmqc

[@evan.5967]

@@honeyshehbaz5988 Yes

[@kingtigercrownestate9102]

Classes that you paid five or six figures for? And this video explains it better and easier for free?

[@getrekt9880]

Can you please tell me in simple words? I'm struggling

[@Ah_Yote]

Self learning here and learning what equity is has been rough

[@mumbibabyz2651]

Simply explained. I've had a hard time understanding equity but with this video, I understand 100%

[@TheFinanceStoryteller]

Thank you, Mumbi! Glad it was helpful!

[@PoornimaMshet]

Mind explaining me again in simple term... My confusion is how equity is generated in the business... is it already a part of assest what owner owns

[@kyleangove4021]

Here’s how I stay lost. You provide a definition to a word I don’t know, and in that definition, there are more words I don’t know the meaning of. So I look them up and there are different definitions and meanings to the word. Example, I just looked up equity for a definition and now I’m watching this video and now I’m more lost

[@TheFinanceStoryteller]

I totally understand that this can be confusing..... Start with the parts you do understand, and build up your understanding from there. Engineering and programming are of a "0 or 1" nature, clear binary distinctions. Financial terminology has a lot more ambiguity and subtlety. In order to better understand how equity fits into the financial statements, take a look at my video about starting a company, raising capital, and making profit: kzbin.info/www/bejne/rYvHkol7jZlkjbM Hopefully that helps you along.

[@SusanFuller.]

Now I have an indepth knowledge of how equity works. Nice.

[@TheFinanceStoryteller]

Glad it was helpful! 🙂

[@konstancyja82]

And using my favorite series for example.... Great! Simple and clear, as usual!

[@TheFinanceStoryteller]

I love "Silicon Valley" too! Can't wait for the new season to start.

[@sebastiansudacki8920]

The 'investing in equity' section helped me a lot, a very clear picture. Thanks!

[@TheFinanceStoryteller]

Great to hear that, Sebastian! You're welcome. Please subscribe to the channel, I have a lot of related videos that could be of interest to you. For example: book value versus market value of shares: kzbin.info/www/bejne/q3TWanSvfK6VacU

[@bassem3435]

omg, I cant believe this word made me not understand so many concepts just because it wasn't properly defined in the first place. Thanks buddy!

[@TheFinanceStoryteller]

Glad it helped! 😎 Maybe my video on the accounting equation is useful for you too: kzbin.info/www/bejne/hYrUnWqPbrOheMk

[@jr.rasentertainment4074]

I used to study Equity in college. Now that I am investing in my own business I know understand what it is all about. Thank you very much for the information. Watching all the way from Vanuatu 😃😁👍🔥🔥🇻🇺🇻🇺🇻🇺

[@TheFinanceStoryteller]

Yeah! Once you have your own business, you "feel" and "live" the concept, rather than just understanding it cognitively in the brain. Wishing you lots of success with your business. Maybe the related videos on the relationship between income statement and balance sheet kzbin.info/www/bejne/rYvHkol7jZlkjbM and the one on the importance of free cash flow in a business kzbin.info/www/bejne/fHSTi4J6jKutptE will also be helpful for you! Greetings back to you from the Netherlands!!!

[@harryfire411]

3:22 thank you for the very clear examples and explanations

[@TheFinanceStoryteller]

Nice to hear that, Harry! Thank you. My mission is to make finance accessible, examples and explanations help with that.

[@oliverkhoo]

Your channel is underrated, thanks for the content.

[@TheFinanceStoryteller]

Thanks for the kind words! Please recommend it to friends and colleagues.

[@vizzyMcExee]

A simple and thorough explanation.

[@TheFinanceStoryteller]

Thank you, Vizzy! Nice to hear that.

[@williesimmons5760]

Vizzy ur on the spot 100% correctO

[@williesimmons5760]

@@TheFinanceStoryteller ur Great!!!!

[@TheFinanceStoryteller]

@@williesimmons5760 Thank you! :-)

[@Dbennett19962]

That was awesome man. Equity versus debt is now understood!

[@TheFinanceStoryteller]

Boom! Happy to hear that. Onwards to seeing equity and debt in action on Apple's balance sheet: kzbin.info/www/bejne/gJCUd2t9pLGCf5o

[@starseed11110]

Thank you. I feel like my brain went on autopilot every time someone said equity before. I truly appreciate this explanation as it definitely had more facets than I had anticipated

[@TheFinanceStoryteller]

Equity is a beautiful thing. I much prefer it over debt. ;-) See my video on financial leverage: kzbin.info/www/bejne/fXa2q5l3btSXnac

[@PoornimaMshet]

Care to explain me please

[@Rayis4444]

I can’t thank you enough. I have been struggling to understand this simple concept for the longest time.

[@TheFinanceStoryteller]

I am so happy to hear that! 🙂 Please subscribe, and spread the word!

[@Rayis4444]

@@TheFinanceStoryteller Already done sir ❤️

[@JoshCamacho]

Thank you! Just started accounting and this really helped clear up what equity was! very helpful!

[@TheFinanceStoryteller]

Happy to help! Please spread the word to fellow students.

[@Archieebrown]

Good content Thank you.

[@lyudmilkotev8473]

Explained and understandable. Thank you. I am going to subscribe!

[@TheFinanceStoryteller]

Awesome, thank you Iyudmil!!!!!

[@honggwan.]

Thank you for the video. It was easy to understand, educational, and informative. 감사합니다. Thank you.

[@TheFinanceStoryteller]

Happy to hear that! Thank you for watching and commenting. :-)

[@Shawn420s]

that opened up an entire part of the money world i had no idea of

[@TheFinanceStoryteller]

And once you have seen it, you cannot unsee it.... ;-)

[@bobbywatson9563]

Online school made this really dull and hard to understand but this video makes it so so simple thank you so much !!

[@TheFinanceStoryteller]

Happy to help, Bobby! 🙂

[@mr.paci17]

Very good and understandable video, keep going man!

[@TheFinanceStoryteller]

Great to hear that! Thank you, Hürkan!

[@ehsan83]

Very clear and informative. Thank you for sharing

[@TheFinanceStoryteller]

You're welcome! Thank you for watching and commenting. Please subscribe!

[@indianweeboo]

Thnx, this concept was never explained in my accountancy class

[@TheFinanceStoryteller]

Happy to help! It's a very important concept, so good thing that you did a search for it yourself. I think you might also enjoy the related video on the relationship between balance sheet and income statement which has an important role for equity as well: kzbin.info/www/bejne/rYvHkol7jZlkjbM

[@chalfontelark9882]

It finally clicked!! Thanks a ton!

[@TheFinanceStoryteller]

Awesome! So happy to hear that. 🙂

[@srinivasangovindasamy5914]

Great clarity given. thanks for sharing.

[@TheFinanceStoryteller]

Happy to help! Thank you for watching and commenting.

[@GulzadaInCanada]

Great video! You made it so easy to understand! Thank you very much!

[@TheFinanceStoryteller]

Glad to hear that! Happy to help! Have a look around the channel, I hope you find many more videos that are useful to you.

[@AbdullahAbdulrahman7]

Amazing video Many thanks

[@TheFinanceStoryteller]

Thanks for the compliment, Abdullah! :-)

[@jj-bu6yb]

I'm learning a lot! Thanks teacher ♥️ may God bless you

[@TheFinanceStoryteller]

Thank you, Jabir! 😃

[@SRR-rh7id]

Thank you for this video!

[@TheFinanceStoryteller]

Glad it was helpful!

[@christinedaray3190]

Very well explained, thank you, sir!

[@TheFinanceStoryteller]

Happy to help, Christine! 🙂

[@camillajames]

educative content. thank you.

[@Archieebrown]

Yeah, it really is

[@Bill0102]

I'm blown away by the quality here. I recently enjoyed a similar book, and it was top-notch. "Game Theory and the Pursuit of Algorithmic Fairness" by Jack Frostwell

[@TheFinanceStoryteller]

Thank you for the kind words and the reading suggestion.

[@quanticdev1071]

This video is pure gold

[@TheFinanceStoryteller]

Thank you!!!! 😊

[@munib1000]

So Simple, bonds = invest in debt and stocks = invest in equity. Thank you.

[@TheFinanceStoryteller]

Yes, the basics are simple. Then you get into the various types of bonds, types of shares, and hybrid capital like perpetual subordinated debt, convertible debt, etc.

[@dsahub6232]

Great video 👍 Keep educating the world financially.

[@TheFinanceStoryteller]

Will do! Thanks for watching and commenting.

[@marioaguila6509]

Really clear explanation. Thank you

[@TheFinanceStoryteller]

Glad it was helpful!

[@ladybug4885]

Thank you for making this so Down to Earth an easy to understand vid only if that were true for my studies SMH LOL An again thanks much appreciate it life saver 😘

[@TheFinanceStoryteller]

Happy to help! Any other terminology that needs explanation, then let me know.

[@waldeh881]

Finally I understood the equity in the balance sheet

[@TheFinanceStoryteller]

Excellent! That is nice to hear. Have a look at some of my balance sheet case studies (Apple, Tesla, Walmart) to have it sink in further: kzbin.info/www/bejne/gJCUd2t9pLGCf5o&pp=gAQBiAQB

[@helloall1289]

Thanks for explaining this in a simple way !

[@TheFinanceStoryteller]

You're welcome!

[@wildebizon1467]

@@TheFinanceStoryteller Ben je nederlands?

[@TheFinanceStoryteller]

@@wildebizon1467 Jazeker!

[@qadeerhussain5751]

Thank you for your valuable information & time

[@TheFinanceStoryteller]

My pleasure! 😎

[@sowjahi6362]

I was not having any idea about this topic in my classes but understood a little bit here

[@TheFinanceStoryteller]

Nice to hear that! Take it step by step. Two more useful videos to watch could be the accounting equation kzbin.info/www/bejne/hYrUnWqPbrOheMk and assets vs liabilities kzbin.info/www/bejne/nGXLenqvjKeshKM

[@short_but_sweet4061]

Thanks a lot 💯💯💯

[@TheFinanceStoryteller]

You're welcome 😊

[@sathya2258]

Thankyou I'm not a student or anything regarding this field ( actually I'm a science student). Im just interested in this stuff. Thanks cuz i had a hard time differentiating.

[@TheFinanceStoryteller]

Thank you, Sathya! It's good to get a basic understanding of the world of finance and accounting. I personally learn the most by going through the financial statements of companies I am interested in (Apple, Google, Tesla, Walmart) and then digging deeper in any areas that catch my interest. Some interesting real world stories about equity along the way! Have a look at some of my finance case studies: kzbin.info/www/bejne/gJCUd2t9pLGCf5o&pp=gAQBiAQB

[@lynnjr.1842]

Thank you!

[@TheFinanceStoryteller]

You're welcome, Lynn!

[@waibosibili8546]

Thanks for the information ❤

[@TheFinanceStoryteller]

My pleasure 😊

[@eversunnyguy]

Brilliantly explained...

[@TheFinanceStoryteller]

Thank you!

[@youssefakharoub9874]

may Allah bless You for explanation and time

[@kambalavijay6800]

Just amazing

[@TheFinanceStoryteller]

Thank you!!! 😊

[@yemaned8684]

great one

[@TheFinanceStoryteller]

Thank you!!!

[@carleynorthcoast1915]

"shareholder capital is owed to Jane the owner of the business" I guess if Jane owns 100% of shares

[@TheFinanceStoryteller]

Correct! Maybe I should have said "shareholder capital is owed to Jane, the sole owner of the business" to make that more clear. Thanks for pointing that out, Carley!

[@TheFinanceStoryteller]

@@user-yb7qc7zk6o Well, it's a very small company, privately held, not listed on the stock market.

[@sheetanchor7862]

Love from india best way of explaination

[@TheFinanceStoryteller]

Thank you very much! Nice to hear that. :-)

[@marinhopaivaduarte4855]

Another great video. Thank you!!!

[@TheFinanceStoryteller]

Thank you very much, Marinho! :-) Sounds like you have been watching some of my other videos as well. ;-)

[@marinhopaivaduarte4855]

@@TheFinanceStoryteller Sure I did. I'm learning a lot with your videos. By the way, I would like to suggest a video about book recommendations to anyone interested in going deeper in this subject.

[@abdulmohsennalsalman174]

Thanks

[@cerealpuffsalmomd1625]

Very good, this help a lot

[@TheFinanceStoryteller]

Nice to hear that! Thank you for watching and commenting.

[@dontskim]

I am an Indian but your video is soo helpful for me....thanks a lot 😇

[@TheFinanceStoryteller]

You're welcome! Greetings back from the Netherlands.

[@Phoenix-ph9qp]

What being Indian has to with it?

[@dontskim]

@@Phoenix-ph9qp i am a student and its just that I didn't found an appropriate video to explain these things soo clearly....so yaa😊

[@quinlan7214]

Thanks !

[@TheFinanceStoryteller]

No problem!

[@dhananjay677]

Sir great explanation

[@TheFinanceStoryteller]

Thank you, Dhananjay!

[@qadeerhussain5751]

Excellent video

[@TheFinanceStoryteller]

Thank you very much! Please subscribe and spread the word!

[@shivang15]

Subbed and liked

[@TheFinanceStoryteller]

Wonderful! Please spread the word to friends and colleagues.

[@tifaniedunn9228]

Thank you for making these terms very simple and clear.

[@TheFinanceStoryteller]

You're welcome, Tifanie! Happy to help!

[@PhamVans]

Key business knowledge right there. Don't just be a goon and sign the dotted line without at least this basic information.

[@TheFinanceStoryteller]

Exactly! Do some research before diving in. Just finished a new video on mergers and acquisitions, that might interest you as well: kzbin.info/www/bejne/eHKpnpqGjdufgJo

[@AleeEnt863]

Thank you...

[@TheFinanceStoryteller]

Happy to help, Alireza!

[@currently9143]

Thank you

[@TheFinanceStoryteller]

You're welcome!!! 😎

[@maureenbennett809]

Great content!😄

[@TheFinanceStoryteller]

Glad you think so, Maureen! Thank you for watching and commenting.

[@Mehrdad100]

Thank you, Seeing this video which perfectly answers what i was wondering, Result = Subscription.

[@TheFinanceStoryteller]

Very happy to hear that!!! Thank you.

[@martinadorn327]

easily explained

[@TheFinanceStoryteller]

Nice to hear that, Martina! Thank you for watching and commenting.

[@shilinglin5464]

very simple easy!

[@TheFinanceStoryteller]

Thank you! :-)

[@jeswinkk2454]

Thanku soo muchh..... 💙

[@TheFinanceStoryteller]

You're welcome!

[@prerna95]

#Agree

[@MrAmrmnabil]

Thnks

[@aishwarytiwari2534]

your cartoons are..... great !

[@TheFinanceStoryteller]

Thank you! Happy to hear that! My teenage kids help me with that (as well maintaining my Instagram channel).

[@AhmedKMoustafa2]

If I want to calculate the equity of a business from the profit and loss statement to use it later on for solvency analysis. Shall I use: Equity = Net Current Assets (Working Capital) - Total Liabilities or = Equity = Net Current Assets (Working Capital) - Current Liabilities (short-term) or Equity = Total Assets (Fixed and Current) - Total Liabilities

[@TheFinanceStoryteller]

Hello Ahmed! Use the balance sheet (statement of financial position) kzbin.info/www/bejne/m3rNdJSbg9JgjM0& for that, as well as the accounting equation assets = liabilities + equity kzbin.info/www/bejne/hYrUnWqPbrOheMk

[@washingtoneofula4060]

Amazing

[@TheFinanceStoryteller]

Thank you. 😎

[@washingtoneofula4060]

Much love from Kenya 🇰🇪🇰🇪🇰🇪🇰🇪

[@TheFinanceStoryteller]

Greetings back from the Netherlands.

[@krupavathi127]

Thank you so much helped me a lot can you make video on Basel norms

[@TheFinanceStoryteller]

Thanks for the suggestion, but that's not an area I have expertise in.

[@manasvigarg114]

Thankss

[@TheFinanceStoryteller]

Welcome!

[@oliviafeii]

I have been struggling to understand this for quite a while now.

[@TheFinanceStoryteller]

Hope the video helped to clarify it, Alicia! Have a look at my analysis of equity on Apple's balance sheet, that might help as well: kzbin.info/www/bejne/gJCUd2t9pLGCf5o

[@sandilemthembu4180]

👏🏾

[@malayalimedia2012]

Does equity have a physical form when starting a company?is equity just a ownership registration to goverment?

[@TheFinanceStoryteller]

Hello Malayali! Articles of incorporation, notarial deed of setting up a legal entity, ownership register held by a limited liability company. See also: kzbin.info/www/bejne/rYvHkol7jZlkjbM

[@danielgarciateschner4573]

Awesome video and great explanation. Thanks for making it! I have a question: in the manufacturing business example, you mentioned that there are two possibilities of investment, bond market and stock market. The question is: what is the difference between the equity market and the stock market? Are there different types of shares that we can invest in(an equity share, a stock share) and if so, what does each option imply? Thanks in advance! Again, great video! Best wishes!

[@TheFinanceStoryteller]

Thank you for the kind words! In most cases, in US English, people use the terms equity market and stock market as the same thing. Some people however use stock market purely for stocks that are listed on a stock exchange ("publicly listed"), versus equity market for privately held companies where venture capitalists might directly buy a stake. Hope this helps.

[@danielgarciateschner4573]

@@TheFinanceStoryteller wonderful! That makes sense! Thanks for answering 👍😄 All the best!!!

[@TheFinanceStoryteller]

Happy to help!!! Thank you for watching and commenting. Please spread the word to friends and colleagues.

[@taggthis]

Thank you, I am just about to make my first index fund purchase via vanguard. I intend to invest long term and just leave the funds ‘locked away’ for at least 5 years forgetting about it. I am just getting slightly stuck on how I balance my percentage portfolio between equity vs bonds. Low risk is good for me. Any tips or related videos you can recommend?

[@TheFinanceStoryteller]

Hello Leslie! I like "buy and hold" for the long term as well! I can think of 3 tips right now: I can show you what is in my portfolio in my video "What is an ETF" kzbin.info/www/bejne/fXOvf36YhMyEatk (not encouraging you to copy it, but it does address the question of balancing a bit) I have some practical tips on how to start investing: kzbin.info/www/bejne/qJWnXoOEraanoKs And to "zoom out" to the bigger picture, these are my thoughts on building an investment portfolio kzbin.info/www/bejne/gWXQiJdor6eMjM0 Hope this helps!

[@jacob6426]

So equity is almost synonymous with just saying ownership? If you have equity on a house that's your share you paid and that you own.

[@TheFinanceStoryteller]

Yep, pretty much. Equity in a house is what it is worth (market value) minus the loans/mortgage you have on it.

[@flipinfin]

@@TheFinanceStoryteller so equity has nothing to do with profit?

[@TheFinanceStoryteller]

@@flipinfin In accounting, equity is a balance sheet item, while profit is an income statement item. If a company makes profit year after year, and does not pay out a dividend to shareholders, then equity will keep rising. See also: kzbin.info/www/bejne/rYvHkol7jZlkjbM

[@johnquilla8236]

So in example #2 in the long run you can have an equity of the house of 500k meaning you have 100% ownership of it??

[@TheFinanceStoryteller]

@@johnquilla8236 Yes, if you fully pay down the mortgage.

[@LakeShow2022]

I might start a career in Business.Very Interesting

[@LakeShow2022]

I need Guidence Sir!!

[@TheFinanceStoryteller]

Start here: business plans kzbin.info/www/bejne/fHSTi4J6jKutptE and cash flow patterns in business kzbin.info/www/bejne/i3jHY5-ie6ecg6M and price vs value kzbin.info/www/bejne/aIGyaqd_qZpraZI

[@LakeShow2022]

@@TheFinanceStoryteller Big Thanks

[@TheFinanceStoryteller]

Happy to help! Every video also includes links through the endscreen or in-video cards (popping up in the top right of the screen) that link to related videos. Follow whatever captures your interest!

[@TheFinanceStoryteller]

Just thought of another video that I think is a "must see": SWOT analysis kzbin.info/www/bejne/nYakgIeHl7iHbqc

[@Aaaabbbccc098]

👍👍👍

[@TheFinanceStoryteller]

Thank you, Abeno!

[@alangervasis]

Does investing in bond market mean that the investor is paying a portion of the debt of the company? If yes, how does the new investor make profit in this bond market?

[@TheFinanceStoryteller]

Nope, it means that the investor is holding a portion of the debt of the company. The company owes money to the bond investor.

[@chinmeeyap3186]

Hi. Your video explain very clearly. Would like to ask if my Total Equity is ($10,000) loss. Current yr earning is $1800. What is the Retained Loss? Total shareholders's Equity is $2. Thanks

[@TheFinanceStoryteller]

Hi Chinmee! Your question is not very clear to me, but perhaps my video on retained earnings kzbin.info/www/bejne/rpragptrepx9jbM or the statement of changes in equity kzbin.info/www/bejne/rmTFm6Vpf7WYmqc can help.

[@ramimpethi6368]

Good day I want to understand this:Does equity have any effects on the bond I have to pay(increase or decrease) or it's just an indicator of how much I'm entitled to the property I am paying for? Thabk you

[@TheFinanceStoryteller]

Hello Rami! Yes, there is interaction there. Look into a term called "loan-to value" (LTV). The higher the LTV, the higher the risk for the bank on the loan, the higher the interest rate charged.

[@learningchannel274]

Thanks for the spoilers!!!

[@TheFinanceStoryteller]

Not quite sure what you are referring to, but you're welcome!

[@learningchannel274]

I was just kidding. Thanks for the video.

[@TheFinanceStoryteller]

@@learningchannel274 No worries! Thank you for watching and commenting. Appreciate the support!!!

[@Ditatwilight]

So it's the part that you own of the value of what is mortgaged

[@TheFinanceStoryteller]

Yes, that is one way to put it.

[@destined0645]

Is equity the amount investors like in dragon den pay to the company to hope for dividend???

[@TheFinanceStoryteller]

There are two ways for investors to benefit from investing equity capital in a company: possibly being able to sell their shares for more than they bought them for, and receiving a dividend if the company in a later stage of development is generating enough free cash flow to be able to pay dividends. See also: my video on initial public offerings kzbin.info/www/bejne/aqWZY3V7fZ50oNU and dividend explained kzbin.info/www/bejne/jaqag2B9psuVbMU

[@mohammedgoni4678]

Great video. I have a question here. What if I start a company and finance it without taking any loans, then is there any equity?

[@TheFinanceStoryteller]

Yes, equity is the same as shareholder capital. Take a look at my video on the relationship between income statement and balance sheet, it is the story of starting a company and doing the journal entries step-by-step: kzbin.info/www/bejne/rYvHkol7jZlkjbM

[@mohammedgoni4678]

@@TheFinanceStoryteller thanks . I will check it

[@anmoljain535]

Can anyone tell me what is the correct order of watching the finance storyteller videos in order to learn finance from scratch?... highly appreciated

[@TheFinanceStoryteller]

Hello Anmol! I would recommend to use the playlists for that. Finance for beginners kzbin.info/www/bejne/n4Oak2WEn8x0hZo and Accounting 101 kzbin.info/www/bejne/hYrUnWqPbrOheMk and Finance case studies kzbin.info/www/bejne/hnqciWiPl8qelac Once you are in a video, cards (pop-up messages) will appear on the top right, with suggestions of related videos to watch. Also, the endscreen of every video has two suggestions of what to watch next. Hope this helps!

[@ChyeHeng17]

Nice explanation. Just some improvement in the visual presentation would drastically improve this video attractiveness.

[@TheFinanceStoryteller]

Thanks for the feedback. Trying to do the best I can!

[@picalingo5244]

OMGOSH! Your video helps me to understand better about the differences of all these jargon! I'm still confused with the part where it shows Stock Market and Equity Market. Do you mind to help clarifying? Thanks! :) Q1. Are stock market and equity market the same? Q2. Is equity also known as securities? Is it called equity securities? If that so, equity = securities = stock. Do they all actually mean the same? Q3. Is debt securities the same as bond?

[@TheFinanceStoryteller]

Hi! Happy to help. Q1. Yes. Q2. Securities can be equity or debt. So yes, equity securities = stock. Q3. Yes. I think my video on market value versus book value might be helpful for you as well: kzbin.info/www/bejne/q3TWanSvfK6VacU

[@picalingo5244]

@@TheFinanceStoryteller Thanks for your help! You are a great educator! 🥰🥰 will watch that video later! :)

[@picalingo5244]

@@TheFinanceStoryteller One quick question, is financial instrument referring to all kinds of securities?

[@TheFinanceStoryteller]

When I hear the term "financial instrument", I think of things like options, etc: kzbin.info/www/bejne/fpDVeIFrrLSerLs

[@picalingo5244]

@@TheFinanceStoryteller I see! Thanks again! :)

[@2letterz]

The banks are only able to create such loans from our private estates once we provide a SSN & signature. Everything is owed back to us the original creditors correct?

[@TheFinanceStoryteller]

Sorry, can't help you there. I am not an expert on loan origination and banking.

[@jedslockedter4me]

So equity is basically profit that you haven’t cashed in on yet. It’s a “stand-in credit score” on the profit you’ve accumulated.

[@TheFinanceStoryteller]

I would phrase that slightly differently. The main elements of equity are paid-in capital (the amount shareholders contribute when the company is started, or in subsequent rounds of financing), and retained earnings (the part of the profits that the company made history-to-date that hasn't been paid out in dividends). To see how that works, I recommend my video on the link between the income statement and the balance sheet: kzbin.info/www/bejne/rYvHkol7jZlkjbM

[@tichsong8022]

what if for example i use my money to buy the house for 500k I wouldnt have any other connection with the back would I? so how will i equity be then?

[@TheFinanceStoryteller]

Correct. If you have $500K of your own money and use it to buy the house, then it's all financed with equity with no bank loan.

[@mohammaddimassi1596]

One question, If I was an investor in this company I can invest in bonds? meaning I'll buy bonds for the company expecting a return from said company and the ability to repay the bond while earning profit in doing that?

[@TheFinanceStoryteller]

Correct, Mohammad! Actually, the topic of "what is the difference between investing in shares vs bonds" is on my list of video topics to make in the near future. If you buy bonds, you have visibility on the time horizon in terms of when they repay (5 year loan, 10 year loan), interest rate or other way of compensating the investor for the investment (2% per year, 3% per year, etc.), and possible collateral/security in case the company goes bankrupt. As a shareholder, you are co-owner of the company, and hope to expect dividends from the company (now or later), it's for an indefinite period (until you sell the shares) and basically have little or no protection in case the company goes bankrupt. Does that help?

[@TheFinanceStoryteller]

@MAGIC ㄆ SOUMIK I would say that stocks are NOT time bounded: you become a shareholder, and can remain so for an indefinite period (until you sell, until the company gets acquired, or until it goes bankrupt). Bonds tend to be issued for a pre-defined period (1 year, 3 years, 5 years, 10 years, etc.), even though there are also things called "perpetual bonds". If bonds are listed, then you can trade them. Some bonds are, some aren't.

[@Chinnapaiyanch]

Equity and shares are same ? Sir Please clear doubt shares / stock / equity are same ? Or equity means equal distribution of profit from shares ???

[@TheFinanceStoryteller]

Hello Muhammad! Equity, stock and shares are related terms, but not always fully the same. If someone talks about "having equity in a company", then it is indeed a synonym for "having shares in a company". Distribution of profit to shareholders is called dividend: kzbin.info/www/bejne/jaqag2B9psuVbMU

[@Chinnapaiyanch]

@@TheFinanceStoryteller Thank you

[@ashfaqahmed1962]

First starts with definition .