Equity is important because it represents the real value of one’s stake in an investment. Investors who hold stock in a company are usually interested in their personal equity in the company, represented by their shares. Yet, this kind of personal equity is a function of the company’s total equity, so a shareholder concerned for his or her own earnings will also have a concern for the company. Owning stock in a company over time will ideally yield capital gains for the shareholder and potentially dividends. It can also give the shareholder the right to vote in board of directors elections. These benefits further promote a shareholder’s ongoing interest in the company.
