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Nick R

What is the difference between equity and stocks?

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Hi, I would like to know the difference between equity and stocks.

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Hello, thank you for your question!

 

The difference between equity and stock is that all types of stocks are equity, not all types of equity are stocks. Equity consists of all the investments and earnings made by the owners, while stocks are just a way through which owners establish an equity stake in a certain company.

Things that fall under equity are:

 The common stocks-which give someone an ownership stake in the company,
 The preferred stocks-which make sure that when earnings fall, those who have the preferred stocks are  paid first,
 The retained earnings-when the company has a certain amount of earnings it can choose to issue dividends to stockholders or keep that amount for future needs,
 The contributed surplus-corporations issue stock which can be valued at $1 or less, which investors can buy at a higher price and excess is listed as contributed surplus,
 The treasury stock-is the stock that the company has purchased back from the customers.

Share capital can be another name for the money invested into the company by stockholders, the difference between equity and share capital is that share capital doesn’t include retained earnings, while equity does.

In conclusion, equity is capital invested in the company by owners, while shares are the division of this wealth between the owners and shareholders. Equity refers to the value of the business, while shares or stocks refer to the amount of involvement in the business.
 

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Hello, thank you for your question! 

There are also 7 main differences that separate stocks from equities.

Trading on stock exchanges

Stocks are parts of equity that are traded on stock markets, while equities are not traded on stock exchanges.

Public participation

Stocks represent general public participation through their ownership, while equities are not open to the general public, but only to specific individuals that own them.

Price fluctuation

Stocks are traded in high volumes, thus they are susceptible to daily price fluctuations, while equities are not traded therefore they do not suffer from price changes.

Value

The number of stocks multiplied by their value, gives us the market value of a company, while the number of equities multiplied by the face of the value of equities gives us the book value of the company.

Disclosure in the Balance Sheet

Stocks are not disclosed in the Balance sheet of the company, while the equities are disclosed.

At the time of Acquisition or Merger

Values of stocks are considered in times of acquisitions or mergers, while the value of equity is not considered when valuing the company during these actions.

Listing on stock exchanges:
For equity share to be listed as stock, equity needs to be listed on the exchange compulsory list, this is not the case with the equities, which can go unlisted.
 

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Hello, thanks for asking! 

There are several main differences between equities and stocks, which are based on a number of facts such as trading on stock exchanges, public participation, price fluctuation, value, disclosure in the balance sheet, listing on the stock exchanges, and actions at the times of acquisition or merger. 

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