What is included in a company's equity?

A company's equity represents the ownership value that shareholders have in the company and is calculated as the difference between total assets and total liabilities. This relationship is fundamental in accounting and is rooted in the accounting equation, which states that assets equal liabilities plus equity.

By rearranging that equation, equity can be derived as assets minus liabilities. This means that equity shows what is left for the owners after all debts have been settled, effectively measuring the net worth of the company. Understanding this concept is crucial for evaluating a company's financial health and performance, as equity can be an indicator of how well the organization is managing its resources and obligations.

The other options do not correctly define equity. Assets minus expenses does not provide a complete picture of a company's financial situation, as it ignores liabilities. Liabilities plus revenue mixes different accounting elements and does not lead to equity. Finally, assets plus expenses would inaccurately increase the asset total without reflecting the true nature of equity, which is only concerned with the relationship between assets and liabilities.