But equity is not valuable to the firm.
Similar to a liability, equity is an obligation the firm has to the owner, which can sometimes create tremendous confusion.
So, when we are looking at the equity on a balance sheet, which hat are we wearing? Company's or owner's?
We must see the equity from the point of view of the business, not the point of view of the owner. From the company's point of view, equity is the obligation that the business seeks to grow in service to its owner. It’s the "good obligation."
If the business could magically erase the liabilities to creditors, that would be wonderful. Whereas the business "wants" to owe its owner. That’s the very purpose of the business.
As with many things in life, equity appears differently depending upon how you look at it.
Warm Regards, Peter