Equity in Crypto Ventures: Sharing the Ownership Pie
Equity is the money that will be returned to the shareholders of the company if all assets of the company are liquidated and all debts are paid off in the event of liquidation.
What is equity?
In the financial world, equity is the value of a company that can be attributed to its shareholders. In a company’s balance sheet, equity is a measure of the shareholders’ share in the company. Equity is calculated by subtracting a company’s total assets from its total liabilities.
Equity has two forms: balance value and market value.
Usually equity is listed in the financial report under its market value, which can be much more or less than its book value. The reason for this difference is that accounting reports are focused on the past, while financial analysts are evaluating what they think financial growth will be in the future.
Market value is used to determine whether a company’s stock is publicly traded. Market value is the price of the last share multiplied by the total number of shares outstanding. When a company is privately held, it is much more difficult to determine its market value. If a company needs to be formally valued, it hires specialists for detailed studies, such as investment bankers, accounting firms or appraisal firms.
The balance value of a company’s equity is basically determined by the industry in which it operates and how it maintains its assets. Because companies can make relatively high returns on their assets, companies that are projected to expand and make large profits in the future often have a book value lower than their market value, i.e., the value of the business as set by the stock market.
In fact, this indicates that the market is not optimistic about a company’s future earnings potential, but value investors believe the market is completely wrong.
As for the cryptocurrency world, investors can buy cryptocurrency project tokens/coins and put them on the map to earn a recurring stream of income. The amount of reward depends on the total number of cryptocurrency shares or tokens they own.