True or False? Owner's equity (also called net worth) is essentially what would be left for the owners from company assets after paying off all liabilities.

Question

BlackTom AI · Accepted Answer

The statement presents a definition of owner's equity (net worth) in terms of what remains for the owners after liabilities are paid. 
Option 1 (True): This aligns with the fundamental accounting equation: Assets minus Liabilities equals Owner's Equity. In practice, if a company were to settle all its debts, the residual value attributable to owners would be the owners' equity, so describing it as what would be left after paying liabilities is accurate. 
Option 2 (False): Claiming that owner’s equity is something other than assets minus liabilities would be incorrect, because equity is precisely the residual interest in the assets after obligations to creditors have been satisfied. It ignores the core relationship defined by the accounting framework. 
In sum, the given statement captures the essential concept of owner’s equity as the net residual value after liabilities are paid, while the alternative would misstate that relationship.

11:709:448:01 FOOD PROD MGMT FINAL Exam - F25- Dec 18- Requires Respondus LockDown Browser

True or False? Owner's equity (also called net worth) is essentially what would be left for the owners from company assets after paying off all liabilities.

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