Explain the concept of equity in financial accounting, detailing its significance within the broader framework of a company's financial structure and its relation to ownership and claims on assets.

• Define equity and its components, such as common stock, preferred stock, additional paid-in capital, retained earnings, and treasury stock.
• Discuss the role of equity in determining the net worth of a company and its ability to generate future profits.
• Explain how equity represents the residual claim on assets after all liabilities have been satisfied.
• Describe the various sources of equity financing, including issuing common and preferred stock, and the impact on the company's financial statements.