For investors, equity is a crucial notion. For example, while evaluating a firm, an investor may use shareholders’ equity as a metric to determine if a certain acquisition price is too high. If, for example, the business has typically traded at a price to book value of 1.5, an investor would be hesitant to pay more than that until the company’s prospects have fundamentally changed. An investor, on the other hand, could feel safe purchasing shares in a somewhat poor company if the price paid is sufficiently cheap in comparison to its equities.