A company's net worth is equal to which of the following?

A company's net worth is equal to which of the following?

• A. Net income
• B. Owner's equity
• C. Total assets
• D. Liabilities

Answer: (B)

Net worth is the owner's equity in the business, which equals assets minus liabilities. This residual claim shows what the owners actually own after all debts are paid. Net worth increases when profits accumulate (retained earnings) and decreases when liabilities rise or assets fall. Net income, while it boosts equity over time, is not the total net worth itself. Total assets are the resources the company controls, but they don’t account for what’s owed. Liabilities are the obligations that reduce net worth. So the correct concept is owner’s equity.

Net worth is the owner's equity in the business, which equals assets minus liabilities. This residual claim shows what the owners actually own after all debts are paid. Net worth increases when profits accumulate (retained earnings) and decreases when liabilities rise or assets fall. Net income, while it boosts equity over time, is not the total net worth itself. Total assets are the resources the company controls, but they don’t account for what’s owed. Liabilities are the obligations that reduce net worth. So the correct concept is owner’s equity.