In accounting terms, which concept represents the owners' stake in the company after liabilities are subtracted from assets?

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Multiple Choice

In accounting terms, which concept represents the owners' stake in the company after liabilities are subtracted from assets?

Explanation:
Equity is the owners' stake in the company after liabilities are subtracted from assets. It comes from the accounting equation: Assets = Liabilities + Equity. Rearranging shows Equity = Assets − Liabilities. For example, with assets of 100 and liabilities of 60, owners' equity is 40. This residual claim is what the owners actually own after debts are paid; in corporations it's called shareholder's equity, and in other business forms it's owner's equity. Assets are resources; liabilities are obligations; the difference between the two is the owners' stake. Net worth is a related concept in everyday language, but the formal accounting term for the owners' stake is equity.

Equity is the owners' stake in the company after liabilities are subtracted from assets. It comes from the accounting equation: Assets = Liabilities + Equity. Rearranging shows Equity = Assets − Liabilities. For example, with assets of 100 and liabilities of 60, owners' equity is 40. This residual claim is what the owners actually own after debts are paid; in corporations it's called shareholder's equity, and in other business forms it's owner's equity. Assets are resources; liabilities are obligations; the difference between the two is the owners' stake. Net worth is a related concept in everyday language, but the formal accounting term for the owners' stake is equity.

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