Equity Is: Concepts, Formulas, and Their Role for Stock to Digital Asset Investors

Jakarta, Pintu News – Equity is one of the fundamental concepts in finance and accounting that reflects the value of ownership in an entity. In a corporate context, equity is an important indicator of financial health and the owner’s position with respect to assets and liabilities. Understanding equity is relevant not only for stock investors, but also for modern market participants who are starting to recognize digital assets and tokenization.

What is Equity in Balance Sheet

Equity in the balance sheet is the owner’s residual right to the company’s assets after deducting all liabilities. In other words, equity shows the share of assets that economically belongs to the shareholders or owners of the business.

In the statement of financial position, equity is placed on the liabilities side along with liabilities. The value of equity can change with the company’s profit and loss, dividend distribution, or other capital transactions.

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Definition of Equity According to PSAK and Experts

According to the Statement of Financial Accounting Standards (PSAK), equity is the residual right to the entity’s assets after deducting all liabilities. This definition emphasizes that equity is not a liability, but rather a claim of owners.

Academically, accounting experts define equity as the owner’s investment plus accumulated operating results retained in the company. It reflects a company’s level of solvency and long-term durability.

Types of Shareholders’ and Owners’ Equity

Shareholders’ equity in public companies generally consists of share capital, share capital, retained earnings, and other comprehensive income components. Share capital reflects the funds deposited by shareholders when shares are issued.

In a sole proprietorship or firm company, the owner’s equity is usually in the form of initial and additional capital, as well as retained earnings or losses. This equity structure is simpler than that of a public company.

Elements and Elements of Company Equity

The main elements of equity include paid-in capital, retained earnings and reserves. Paid-up capital comes from the owners’ or shareholders’ contributions to the company.

Retained earnings are accumulated net profits that are not distributed as dividends. Meanwhile, reserves are formed for specific purposes, such as general reserves or asset revaluation reserves.

Equity Calculation Formula and Example

The basic formula for equity is:
Equity = Total Assets – Total Liabilities

As a simple example, if the company’s total assets are Rp10,000,000,000 and total liabilities are Rp6,500,000,000, then the company’s equity is Rp3,500,000,000.

In spreadsheet practice such as Excel, this calculation is usually written with a simple formula that subtracts total liabilities from total assets on the balance sheet.

Equity Analysis Objectives for Stock Investors

For stock investors, equity analysis is used to assess a company’s book value and its financial health. A positive and growing equity indicates the company’s ability to create value for shareholders.

Investors also use equity-based ratios such as debt to equity ratio and return on equity to evaluate the risk and efficiency of capital utilization. This analysis helps make more rational investment decisions.

Difference between Stock Equity and Bond Debt

Equity shares represent ownership and have no fixed return obligation. Shareholders bear the highest risk but also have the potential to earn the greatest returns.

Bonds, on the other hand, are debt instruments with interest and principal payment obligations. Bondholders do not have ownership rights, but have a higher claim priority than shareholders.

Sample Balance Sheet of Equity of a Listed Company

In a listed company’s balance sheet, equity typically includes share capital, additional paid-in capital, retained earnings and other equity components. This structure reflects the company’s funding history and performance since its establishment.

Changes in equity from year to year give an idea of whether the company is able to create added value or is experiencing capital erosion due to continuous losses.

Equity in the Age of Crypto and Tokenized Assets

In the age of digital assets, the concept of equity is beginning to evolve through tokenization of assets and blockchain-based ownership. Tokenized assets allow for an equity-like representation of ownership in the form of digital tokens.

Although conceptually similar to equities, the regulatory and investor protection aspects of tokenized assets are still evolving. Therefore, understanding conventional equities remains an important foundation before entering digital instruments.

Conclusion: Benefits of Understanding Equity

Equity is a key indicator in assessing the financial position and ownership value of an entity. Understanding equity helps investors, analysts and business owners make more informed financial decisions.

Amidst the development of capital markets and digital assets, the concept of equity remains relevant as the foundation of financial analysis. Understanding equities thoroughly allows for a more balanced management of risks and opportunities.

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This content aims to enrich readers’ information. Pintu collects this information from various relevant sources and is not influenced by outside parties. Note that an asset’s past performance does not determine its projected future performance. Crypto trading activities are subject to high risk and volatility, always do your own research and use cold hard cash before investing. All activities of buying and selling Bitcoin and other crypto asset investments are the responsibility of the reader.

Reference

• Indonesian Institute of Accountants. Statement of Financial Accounting Standards (PSAK) – Conceptual Framework for Financial Reporting. Accessed February 3, 2026
• Investopedia. Equity: Definition, Types, Formula, and Examples. Accessed February 3, 2026
• Corporate Finance Institute. Shareholders’ Equity. Accessed February 3, 2026