An asset is an economic-value resource owned or controlled by an individual, corporation, or country with the expectation that it will deliver a future benefit. Assets are listed on the balance sheet of a company and are acquired or produced to increase the value of a company or to support the operations of that company.
A company’s equity, or shareholders ‘ equity, is the net difference between the total assets of a company and its total liabilities. In fundamental analysis, a company’s equity is used to determine its net worth.
Shareholders ‘ equity reflects a company’s net worth, or the amount of money left over to shareholders after all assets have been liquidated and all debts paid off.
Debt is a sum of money one party borrows from another. Debt is used by many individuals and corporations as a way of making large purchases that, under normal circumstances, they could not afford. A loan agreement grants permission to borrow money to the borrowing party on the condition that it is repaid back at a later date, generally with interest.
There is a significant difference between the two last obligations: the amount due to the lenders is fixed while the amount due to the equity holders is variable depending on how much income is generated.