What Is Business Equity and How to Calculate It?

Companies use their business equity to fund their growth and expansion. To source these funds, owners sell a part of the company to various investors which represents equity. Read on to know what equity means in business, its types and how to calculate it.

In simple terms, you can calculate business equity as the difference between the total assets and total liabilities of the company. One can get an idea about the valuation of a company by looking at the equity. 

Equity value is recorded in the company's balance sheet. A quick glance at the equity value can give prospective and current investors a general view of a company's financial health. If the company has a negative equity value, i.e., total liabilities exceed total assets, it indicates balance sheet bankruptcy or insolvency.

Now, as you are familiar with the definition of business equity, it’s time to move to types of equity and other aspects.

There are primarily two types of equities in a company which are as follows:

1. Stockholder Equity

A stockholder’s equity is the total ownership of various investors of the company in the form of shares or stocks. It shows the amount that is required to be paid to the stockholders at the time of liquidation. 

A stockholder’s equity includes retained earnings apart from regular dividends. Retained earnings refer to the part of profit which a company saves rather than distributing it. A stockholder’s equity is more common in case of corporations.

2. Owner’s Equity

An owner's equity refers to the amount invested by the owner of the company. It is applicable in case of sole proprietorships or partnerships, in which there is a limited number of owners who have absolute control over the business. 

This equity shows the capital available in a sole proprietorship/partnership. One can also use them to measure a company's worth.

Exporters eligible for the duty drawback on export must show the following documents before availing this scheme. They are as below:

• Three copies of freight Bill
• Copy of Bill of entry
• Copy of Bill of Lading or Airway bill.
• Copy of Bank Certified Invoices.
• Import Invoice
• Proof of payment of import duty paid on importation.
• Approval from the Reserve Bank of India for re-exportation
• Six copies of AR-4 documents
• Export invoice and packing list.
• Freight and Insurance certificate
• Copy of the Test report of goods
• MODVAT Declaration
• A worksheet showing the drawback amount claimed
• DEEC Book and licence copy where applicable.
• Transhipment certificate, where applicable
• Two blank acknowledgement cards 
• Pre-receipt for drawback amount on the reverse of Shipping Bill duly signed on the Rs. 1 revenue stamp

The exporter needs to follow the following steps to take advantage of the duty drawback scheme:

Step 1: Exporters must fill all requisites in a prescribed shipping bill format under the DBK scheme.  

Step 2: Digital document processing does not require any separate application. 

Step 3: Separate applications for claiming duty drawbacks must be submitted for manual exports.  

Step 4: The exporter must apply for the claim process in accordance with the policies laid down by the Drawback Rules 1995.

Step 5: Once the exporter files the general export manifest, the 3rd shipping bill copy becomes the principal application.