Which of the following statements is true about net worth?
A)A firm's net worth should be higher than the stockholders' equity.
B)A firm's net worth should be equal to 50 percent of the value of the total assets of the firm.
C)A firm's net worth is equal to total assets minus total liabilities.
D)A firm's net worth is the amount that the firm's assets can generate on their liquidation.
E)A firm's net worth is the amount to be paid by the shareholders to the firm on liquidation of the firm.

Question

Quizplus · Accepted Answer

Net worth is defined as total assets minus total liabilities, therefore option C is the true statement. Option A is incorrect because net worth and stockholders' equity are essentially the same thing. Option B is incorrect because there is no set percentage for net worth in relation to total assets. Option D is incorrect because net worth is not necessarily the amount that assets can generate on liquidation, but rather the amount that remains after all liabilities are paid off. Option E is incorrect because shareholders would receive payment from the firm on liquidation, not the other way around.

Which of the Following Statements Is True About Net Worth