Equity, stock and share are all closely related terms within the ownership structure of a corporation. The best way to understand their differences is to start with the broadest term, which is equity, and work toward shares, which represent a fractional form of business ownership.
The most general meaning of equity is ownership in a business. Unlike stock and share, equity applies to non-corporate business structures as well. Anyone with a financial stake in a company, whether a sole proprietorship, partnership or corporation, owns equity. In accounting, the amount of equity owners have is based on the difference between business assets and liabilities. If the company holds $500,000 in assets and has $300,000 in liabilities, for instance, owners' equity equals $200,000.
Stock and Share
Outstanding Shares vs. Float
Another key distinction in the equity structure and stock of a corporation is the comparison of outstanding shares to the floating shares. The outstanding shares are the total number of shares issued, or 100 percent of all corporate shares. A company's floating shares include shares traded on the open market. The float excludes certain restricted shares as well as shares owned by company insiders, and large institutions that register ownership with the U.S. Securities and Exchange Commission.
If a corporation has one million outstanding shares and 250,000 restricted shares, its float is 750,000 shares. A small float means fewer shares publicly traded, which contributes to higher volatility and price movement.
Issuing new shares of stock as employee compensation dilutes ownership, and can negatively affect share price.