Changes in a company's assets and debts, called liabilities, have a big effect on its equity, or ownership value. Here's how it works:

1. Increase in Assets: When a business buys equipment for $10,000, its assets go up. If there are no new debts, equity also increases by$10,000.

2. Decrease in Liabilities: If a company pays off $5,000 of its debt, its liabilities go down. This also means that equity goes up by$5,000.

To sum it up:

• When assets increase, equity increases too.
• When liabilities decrease, equity increases too.

Understanding this relationship is important to see how healthy a company's finances are!