Final answer:
This question relates to General Electric's equity and its application in stocks and home values. Equity represents the value of an asset after subtracting debts, which is key in understanding financial health and potential for leveraging assets.
Step-by-step explanation:
The question pertains to General Electric (GE)'s book value of equity and how it relates to shares outstanding and market prices. During December 2015, GE had a book value of equity of $98 billion and 9.4 billion shares outstanding. Equity is essentially the value of an asset minus the debt on it, which is a fundamental concept in finance. This question also connects to the broader context of how equity can be leveraged in the stock market. For example, an investor may use their stock as collateral to borrow money and buy more stock. However, this comes with risks, as a decline in stock value can lead to a situation where the investor owes more than the present value of their shares.
Looking further, equity applies in various scenarios, including homeowners' situations. For instance, if a person owns a house that is valued at more than what is owed to the bank, the leftover value represents their home equity. The value of this equity changes as the market value fluctuates or as the homeowner pays down their mortgage.