Equity

Equity is the difference between a company's assets and its liabilities. It shows how much of the company the owners have financed themselves, through capital they have put in and through profits left in the company.

In a limited company (aktiebolag, AB), equity is divided into restricted equity (share capital and certain reserves) and unrestricted equity (retained earnings and the profit or loss for the year). Only unrestricted equity may be paid out to the owners, and only if the dividend is justifiable in view of the company's financial position.

Negative equity means that liabilities exceed assets. In a limited company, the board must draw up a control balance sheet (kontrollbalansräkning) as soon as equity falls below half of the share capital, and if this is missed the board can become personally liable for the company's debts.