Define "equity" in terms of finance.

In finance, "equity" refers to ownership interest in a company. This means that equity represents the shareholders' stake in the company, which can be evidenced through stocks or shares they hold. When individuals or entities purchase shares of a company, they effectively buy a piece of that company, granting them rights such as voting on corporate matters and receiving dividends.

Equity is crucial because it reflects the value that shareholders have after all liabilities have been settled, indicating their claim on the company's assets. For example, in the event of a company being liquidated, after all debts are paid, any remaining assets belong to the equity holders.

This understanding of equity differentiates it from other financial terms: it is not about debt (which would involve obligations to creditors) or returns on investments tied to loans, but rather focuses on the ownership aspect and associated rights and responsibilities that come with it. The concept is essential for analyzing ownership structures and assessing the financial health and value of a company.