Equity

Equity means ownership. When you buy a listed share, you hold a slice of that company’s equity. On the balance sheet, equity is what remains after liabilities are subtracted from assets. Equity holders share in profits through dividends and price gains, and they bear losses first if the business fails.

Key takeaways

• Equity is risk capital; it is not a loan with a promised repayment schedule.
• Issuing new shares raises equity but can dilute existing owners.
• Return on equity compares profit with the equity base supporting it.
• Negative equity on the books is a serious warning sign.

Why it matters in Ethiopia

Buying ESX-listed shares is buying equity in local companies. Understanding that you own a residual claim, not a deposit with a fixed return, sets the right expectations for risk.