INVESTING GLOSSARY
Common Equity
Common Equity
Ownership capital typically receiving residual profits after senior claims.
What does Common Equity mean?
Ownership capital typically receiving residual profits after senior claims. Professionals may calculate, document or apply this concept differently depending on the transaction, accounting method, lender policy and governing documents. Borrowers should confirm the precise definition used in any term sheet or agreement.
Common Equity in context
The sponsor's common equity receives remaining cash after debt and preferred returns.
Why it matters in financing
Common Equity can influence how a lender, investor or advisor evaluates risk, pricing, structure, repayment capacity or transaction economics. It should be considered together with the complete financial picture rather than used alone.
Related investing terms
Educational information only. This definition is general, may not match a particular lender or contract, and is not financial, accounting, tax or legal advice.