Equity Cushion

Equity cushion refers to the buffer of equity that a company or individual has above their debts. In simpler terms, it represents the difference between the total value of assets owned and the total amount owed to creditors. A strong equity cushion indicates financial health, meaning there are sufficient assets to cover debts, which can provide security in tough times. Conversely, a weak equity cushion may signal potential financial trouble, as there is less margin to handle economic downturns or unexpected expenses. Essentially, it is a measure of financial resilience and risk management.