In financial terms, what does 'Equity' represent?

Equity represents the value of ownership in an asset after all liabilities associated with that asset have been subtracted. In financial terms, it is calculated as assets minus liabilities. This means if a company owns assets valued at a certain amount but also has outstanding debts or obligations, equity reflects what is truly owned by the shareholders once those obligations are settled. It serves as a key indicator of financial health and allows investors to understand how much of the company’s value can be attributed to its owners.

Analyzing the other options, total revenue generated pertains to the total earnings from sales before any expenses are deducted, which does not reflect ownership value. The amount borrowed by the company relates to liabilities, not equity, as it indicates funds that must be repaid. Gross profit remaining after expenses measures profitability but does not denote ownership interests or represent equity directly. Therefore, the definition of equity centers around the net worth of the company after liabilities, confirming that assets minus liabilities is indeed the correct answer.