What is equity? Equity has several meanings in English. In general, it is simply fairness and the quality of being impartial or reasonable. “Justice and equity are fundamental in a civilized society, like adequate housing, sanitation, and an adequate supply of pure water”. Probably only in those cases, the Italian equivalent is the straightforward equità.
In England and the U.S. – I am quoting my 2001 paper edition of Black’s Law Dictionary – equity is “the system of law or body of principles… superseding the common and statute law when the two conflict”. It applies the principles of natural justice to the settlement of disputes and remedies the limitations and inflexibility of common law. For example, “The parties waive all rights to seek any other remedies whether in law or in equity”. There is no equivalent in the Italian system, we do not translate it and use the English term (Le parti rinunciano a qualsiasi altro provvedimento ordinario o di equity, or in regime di equity).
In finance, the term’s meaning depends very much on the context.
Equity may refer to a stock (azione in Italian), a security, representing ownership in a company (titolo di proprietà). It is the right to share in future profits or appreciation in the company’s value.
Shareholders’ equity (or owner’s equity) on a company’s balance sheet is the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). The Italian patrimonio netto!
More in general, equity a synonym of assets, anything of material value or usefulness that is owned by a person or company (patrimonio).
In terms of investment strategies, equity is one of the main asset classes together with fixed-income (bonds) and cash. You can say that it is important to take a long-term perspective when investing in equities. You may invest in equity funds or individual stocks, in the equity market (azioni, fondi azionari, mercato azionario would be the right words in Italian).
Public equity is capital invested in a public company, while private equity funds invest in assets that are not owned publicly or that the private equity buyer plans to take private.
Finally, in the context of real estate, equity is the difference between the current market value of the property and the amount the owner still owes on the mortgage. In brief, it is the amount that the owner would receive after selling a property and paying off the mortgage. (You can look at this Investopedia’s Video on Equity). Unfortunately, we must use another word in Italian: capitale.
Ooops, I forgot to mention that when brand equity has something to do with the company’s reputation, it is translated “valore del marchio”.
Do you know other meanings of equity?
Are there many translations of equity in your language too?
Let’s keep calm and solve the equity puzzle before translating!