How is the net worth of a firm calculated?
A) Net worth = Current assets minus current liabilities
B) Net worth = Total assets minus current liabilities
C) Net worth = Total liabilities minus current assets
D) Net worth = Total assets minus total liabilities
E) Net worth = Total liabilities minus current liabilities

Question

Quizplus · Accepted Answer

The net worth of a firm is calculated by subtracting the total liabilities from the total assets. This is because net worth represents the amount of equity or ownership that the owners or shareholders have in the company. By subtracting the liabilities from the assets, we can arrive at the net value of the firm's assets that are owned outright by the owners.

How Is the Net Worth of a Firm Calculated