Glossary · Investing Basics
Equity
Ownership interest in a company, represented by shares. Equity holders are entitled to a share of profits and residual assets after liabilities are settled.
01—What is Equity?
The definition — and what it means in practice.
Equity is an ownership interest in a company, usually represented by shares. If you hold equity, you are a shareholder with a claim on the company’s profits (often via dividends) and a residual claim on its assets if the business is wound up, after all liabilities are paid. Equity can be ordinary shares or other share classes, but it always sits behind creditors in priority.
Equity matters because it is where most of the upside and most of the risk sits. Your returns depend on the company’s earnings, growth, dividend policy and the market price of its shares, which can move daily. Unlike lenders, equity holders are not promised fixed payments. Understanding equity helps you interpret financial statements, compare companies, and judge how events like losses, new share issues, or buybacks affect shareholders.
If you own 100 shares, you own a small slice of the company; if it pays a Rs 10 dividend per share, you receive Rs 1,000 (before taxes).
- Equity = ownership in a company, typically through shares.
- Equity holders share in profits and have a residual claim after liabilities.
- Equity returns come from dividends and price changes, not fixed interest.
- Equity is usually riskier than debt because payments are not guaranteed.
- Share count changes (rights, bonus, buybacks) can change each holder’s stake.
02—How equity works on the PSX
The Pakistan-specific rules, conventions, and numbers.
On the Pakistan Stock Exchange (PSX), equity usually means the listed ordinary shares you buy and sell during market hours. Trades are regulated by the Securities and Exchange Commission of Pakistan (SECP), clear through NCCPL, and shares are held electronically at the Central Depository Company (CDC). Settlement is T+1, so ownership from a trade is completed one business day after execution.
Many PSX-listed shares have a Rs 10 face value, and cash dividends are commonly announced as a percentage of that face value (for example, a “100%” dividend equals Rs 10 per share). For investors, equity income can be reduced by withholding tax on cash dividends, with different rates for filers and non-filers. Equity prices on the PSX also face daily price limits for most shares, set around the previous close (LDCP).
03—Common misconceptions
Where investors most often get this wrong.
Equity means the cash a company has in the bank.
Equity is ownership (shareholders’ claim), not cash. Cash is an asset; equity is what remains for owners after subtracting liabilities from assets.
Equity holders get paid before lenders if a company fails.
Equity is residual. In a liquidation, liabilities must be settled first; shareholders only receive anything after creditors have been paid.
A higher dividend percentage always means a better equity investment.
Dividend declarations reflect policy and profitability, but equity returns also depend on business performance and share price movements. Dividends can change and are taxed at source.
04—Using equity on BSL
Where this term shows up across the platform — with live data.
- Browse listed equities and their key data on Stocks.
- Filter companies by market measures using the Stock Screener.
- Track broad equity performance through the KSE-100 Index.
- See upcoming dividend and entitlement timelines on Ex-Dates.
05—Frequently asked questions
What investors ask about equity on the PSX.
Frequently Asked Questions
On the PSX, equity generally refers to listed company shares that represent ownership. When you buy shares, you become a shareholder and can benefit from dividends and share price changes, while bearing the risk of price falls.
In everyday investing, yes: “equity” usually means share ownership. In accounting, “equity” can also mean shareholders’ equity on the balance sheet, which is the owners’ claim after liabilities.
Equity investors can earn through cash dividends and through capital gains if the share price rises. Cash dividends are subject to withholding tax, and capital gains tax depends on holding period and filer status under applicable Finance Acts.
Equity is ownership and does not promise fixed payments. Debt is lending, where the lender has a prior claim and typically receives agreed interest and principal, subject to default risk.
PSX equity trades settle on a T+1 basis. That means the transfer is completed one business day after the trade, through clearing at NCCPL and electronic holding at CDC.
06—Related terms
Keep building the picture.
A unit of ownership in a company. Holding stocks makes you a shareholder, entitled to a proportional share of the company's assets and profits.
The most common form of share capital, entitling holders to proportional ownership of a company. Ordinary shareholders may receive dividends, subject to profitability and directors' recommendations, and typically retain voting rights.
The total market value of a company's outstanding shares, calculated by multiplying the share price by the number of shares in circulation and used to classify companies as large-cap, mid-cap, or small-cap.
A direct payment made by a company to its shareholders, usually from profits, expressed as a rupee amount per share. Subject to withholding tax in Pakistan.
The net asset value of a company is calculated by subtracting total liabilities from total assets. Book value per share is a common metric used to assess whether a stock is undervalued or overvalued.
A financial ratio comparing a company's total debt to its shareholders' equity. A high D/E ratio indicates greater financial leverage and potentially higher risk.
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