How is equity defined in financial terms?

Equity in financial terms refers to the net value of an asset after all liabilities associated with that asset have been subtracted. This concept is essential in both personal finance and business accounting, as it represents the true ownership value of an asset. For example, if an individual owns a house worth $300,000 but has a mortgage of $200,000, their equity in that house would be $100,000. Understanding equity is crucial for assessing personal wealth and making informed financial decisions.

In the context of the provided answer choices, other options do not accurately define equity. The total income generated from assets pertains to revenue or earnings rather than equity itself. Having cash on hand specifically relates to liquidity, while the market value of borrowed capital focuses on liabilities rather than ownership or net asset value. Thus, the correct definition of equity is indeed the net value remaining once liabilities are accounted for.