The Description of the Relation Between a Company's Assets, Liabilities

question 237

Multiple Choice

The description of the relation between a company's assets, liabilities, and equity, which is expressed as Assets = Liabilities + Equity, is known as the:

• A) Income statement equation.
• B) Accounting equation.
• C) Business equation.
• D) Return on equity ratio.
• E) Net income.

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Definitions:

Direct Method

A way of reporting cash flows from operating activities by showing major classes of gross cash receipts and payments.

Operating Expenses

Costs associated with the day-to-day operations of a business, excluding direct material and labor costs.

Liabilities

Amounts owed to creditors in the form of debts and other obligations.

Statement of Cash Flows

A financial report that provides aggregate data regarding all cash inflows and outflows a company receives.