Shareholders' equity

What the owners have a claim on after every liability is settled: total assets minus total liabilities.

A company with ₹6,200 crore of assets and ₹2,900 crore of liabilities has ₹3,300 crore of equity.

The figure is built from two very different sources and the split matters more than the total. Money the owners put in, sitting in share capital and securities premium, is capital contributed. Profit the business earned and kept, sitting in retained earnings, is capital generated. A company whose equity is mostly contributed has been funded by its shareholders; one whose equity is mostly generated has funded itself, and over twenty years the difference between those two histories is the difference between a compounding machine and a capital sink.

It is also an accounting number, not a value. A consumer business whose brand is worth ten times its book equity is normal, and so is a steel plant whose assets are carried above what anyone would pay.

Assets minus liabilities. Everything else is detail.

The statement of changes in equity is where the year's movement is explained, and it is the shortest useful page in a set of accounts. It opens with last year's balance, adds the profit, adds or subtracts other comprehensive income, subtracts dividends, adds anything raised from issuing shares, and arrives at this year's figure. Reading it takes a minute and answers a question the balance sheet alone cannot: whether equity grew because the business earned money or because somebody put more in.