Equity represents the owner’s interest in the company, calculated as assets minus liabilities. It’s a key indicator of financial health and investor confidence, reflecting the net worth of the company. Equity can increase through retained earnings, which are profits reinvested in the business, or through the issuance of new shares. Higher equity generally suggests a stronger financial position, as it indicates that the company has sufficient assets to cover its liabilities and can fund future growth initiatives. Additionally, equity provides a buffer against losses, giving investors confidence in the company’s ability to withstand economic downturns and other challenges.