Difference between Equity and Stock

Key Difference: Equity is described as the value of a business or an asset, after the liabilities have been paid off. The stock of a company basically means the equity stake of its owners.

Equity and stock are two essential words in the finance and account division. These words play a huge part when it comes to public companies and the stock market.

The term equity is described as the value of a business or an asset, after the liabilities have been paid off. In terms of a business, the equity is described as the net worth, minus all the debts. From the point of view of an investor, the equity would be the amount of money invested in the business. For example, if one invests 100,000 in a business, they would have equity of 100,000 in the business.

Equity is also a form of investment where an investor purchasing a company’s stocks or shares, which gives him an ownership stake in the company. Another definition of equity is used in financing that refers to raising funds for a business through the issue of stocks/shares.

 The term stock is essential to equity as it is a part of equity. If a business is being listed on the stock market, the capital of the business would be divided into shares and sold on the market. The stock of a company basically means the equity stake of its owners. Let’s simplify this further. Now, a company needs to raise capital for expansion, what it can do is either take a loan or it can issue shares to sell, allowing people to buy a share or a part of the company. This part that it wants to sell through shares is known as stock.

The most common type of stock is – well common stock. Ownership of this type of stock allows the buyer to participate in both the profits and loses of the company, along with the ability to vote at the shareholder’s meeting.

Comparison between Equity and Stock:

 

Equity

Stock

Definition

Money is raised by adding partners

The part of the company that the owners wish to put on the market

Types of investment

Shares, stocks

Shares

Risky

More risky

Risky

Advantages

  • No monthly/yearly payments
  • No interest
  • Losses are not shared
  • Say in the dividend
  • Say in the price of the stock
  • No monthly/yearly payments
  • No interest
  • Losses are not shared
  • Say in the dividend
  • Say in the price of the stock

Disadvantages

  • Major decisions are put to votes
  • Profits are shared among the shareholders
  • Major decisions are put to votes
  • Profits are shared among the shareholders

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