how is equity used by investors 
equity is a very important concept for investors for instance in looking at a company an investor might use shareholders equity as a benchmark for determining whether a particular purchase price is expensive if that company has historically traded at a price to book value of 1 5 for instance then an investor might think twice before paying more than that valuation unless they feel the company s prospects have fundamentally improved on the other hand an investor might feel comfortable buying shares in a relatively weak business as long as the price they pay is sufficiently low relative to its equity 