Equity Security Definition and Quiz

1. Define - Define equity securities.
2. Context - Use equity security in a sentence.
3. Quiz - Test yourself.

by Paul Alan Davis, CFA

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Equity Security for investment modeling

Beginner

An Equity Security is an investment in the equity or ownership side of a business. It is typically a variable investment, meaning an investor may face a loss of principal. In the event of bankruptcy, Equity Securities are given lower priority than Debt Securities.

Synonym: stock, equities

For context, the investor in an Equity Security is normally interested more in the growth of capital than in a stream of income, like dividends.

Equity Security prices are sensitive to the business cycle and the forward-looking prospects of the firm.

In a Sentence

Doc:  Think of an equity security like the ownership of a home.
Lia:  So brokerage firms offering stocks on margin are like mortgage lenders?

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Quiz

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Questions or Comments?

Still unclear on Equity Security? Try out the financial modeling course Quant 101.

Related Terms

Our trained humans found other terms in the category investment vehicles you may find helpful.

• Common Stock
• Debt Security
• Derivative Security

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