Equity is the amount invested in a company. The company’s capital is divided into small parts which are known as equity shares. These shares are issued in public by a public company to raise funds. The return generated on equity is called a dividend, which the company is liable to pay to its shareholders when it earns a profit. The dividend is not compulsory to be paid on equity. When the liabilities are deducted from the assets of a company, equity is derived. It holds direct ownership in the company.