Equity
Equity is what owners are left with once every liability is settled: total assets minus total liabilities, the residual claim on a business, also called net assets or shareholders' funds.
Equity is what the owners have a claim on after everyone else has been paid. On the balance sheet it is the figure that makes the two sides agree: . That is why it is described as a residual. Its individual parts are real enough, but nobody funds the total: it is whatever the other two columns leave behind, and it moves whenever either of them does. Published accounts usually label it shareholders' equity.
It builds from two sources. The first is money investors paid in when shares were issued. The second is profit the company kept rather than paid out, which accumulates as retained earnings. Dividends, share buybacks and losses all pull it back down. Return on equity measures annual profit against this figure, and one common measure of financial leverage is the ratio of total assets to it.
The thing people get wrong is treating equity as money available to spend. It is a difference between two other columns, so a company can report large equity while holding almost no cash, and a profitable company that has bought back a lot of its own shares can report negative equity and carry on trading normally. The market's own view of the same claim is the share price multiplied by the share count, which can sit far above or below the book value recorded in the accounts.