Owner’s Equity is a concept used in business to represent the financial interest of owners or shareholders in an enterprise. It can be divided into two components: capital and retained earnings. Capital comes from money invested by the owners themselves, while retained earnings are profits that have been reinvested instead of being paid out as dividends. In essence, Owner’s Equity is the difference between what a company owns (assets) and what it owes (liabilities). This number gives us a clear indication of how well the company is performing and in turn, how much value it provides for its owners. Put simply, the higher the Owner’s Equity balance, the greater the financial security of the owners or shareholders.