Which of the Following Statements Is True About Net Worth

question 96

Multiple Choice

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) On liquidation of a firm, the common stockholders' will receive the exact amount shown in the equity section of the balance sheet.
• E) The net worth of a firm is the amount to be paid by the shareholders to the firm on liquidation of the firm.

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Definitions:

Short Run

A period in which at least one input is fixed and cannot be changed by the firm.

Variable Costing

A cost accounting method that includes only variable costs—costs that change with production levels—in product cost calculations.

Manufacturing Margin

The difference between the cost of manufacturing goods and the sale price, indicating the profitability of production activities.

Unsold Units

Inventory items that have not been sold by the end of a selling period, affecting inventory carrying costs and cash flow.