# Reinvesting earnings increases the book value of equity?

I'm reading this text about elementary concepts in finance. It keeps repeating an example where a company reinvests part of its profits (earnings), and claims that this increases the book value of equity.

However, wouldn't reinvesting increase the value of the company's assets instead and reduce the book value of equity? I mean, if you re-invest part of earnings in e.g. inventory, you would increase the value of assets, not equity, correct?

Technically, isn't the book value of equity just the difference between assets and liabilities? So if you add to assets, you are taking away from equity, not adding to it, right?

The book value is Total Assets minus Total Liabilities and so if you increase the Total Assets without changing the Total Liabilities the difference gets bigger and thus higher.

Consider if a company had total assets of \$4 and total liabilities of \$3 so the book value is \$1. Now, if the company adds \$2 to the assets, then the difference would be 4+2-3=6-3=3 and last time I checked 3 is greater than 1.

On definitions, here are a couple of links to clarify that side of things.

From Investopedia:

Equity = Assets - Liabilities