Net Worth Is

question 83

Multiple Choice

Net worth is

• A)assets plus liabilities.
• B)total income since the company began operations.
• C)total shareholders' equity.
• D)another name for net income.

Identify the factors influencing a firm's decision to adjust its debt ratio and the principle of the trade-off theory.

Analyze the effect of capital structure on a firm’s weighted average cost of capital (WACC) and its valuation.

Understand the relationship between a firm's operating leverage, business risk, and capital structure.

Recognize the role of market conditions, such as recessions, on firms with different levels of leverage.

---

Definitions:

Total Liabilities

The sum of all financial obligations a company owes to outside parties.

Total Assets

The sum of all current and non-current assets owned by a company, reflecting the company's total resources.

Cash Proceeds

Cash proceeds refer to the amount of money received from a transaction, such as the sale of an asset or product, after deducting any selling costs.

Journal Entry

A record in accounting that documents a financial transaction in the ledger.