Question
What is true?
Liabilities are the value of a company before obligations are paid.
Equity is the value of a company before obligations are paid.
Equity is the remaining value in a company after all liabilities have been paid.
Retained earnings are the value of the company.
Liabilities are the value of a company before obligations are paid.
Equity is the value of a company before obligations are paid.
Equity is the remaining value in a company after all liabilities have been paid.
Retained earnings are the value of the company.
Answers
GPT-4o mini
Let’s evaluate each statement to determine which is true:
1. **Liabilities are the value of a company before obligations are paid.**
- This statement is false. Liabilities represent the obligations of a company (amounts owed) and do not directly represent the value of the company.
2. **Equity is the value of a company before obligations are paid.**
- This statement is also false. Equity represents the ownership interest in the company and is calculated after liabilities are subtracted from assets.
3. **Equity is the remaining value in a company after all liabilities have been paid.**
- This statement is true. Equity is calculated as total assets minus total liabilities, representing the residual interest of the owners after all obligations have been settled.
4. **Retained earnings are the value of the company.**
- This statement is false. Retained earnings represent the accumulated profits that have not been distributed as dividends and is a component of equity, but they do not represent the total value of the company.
In summary, the true statement is: **Equity is the remaining value in a company after all liabilities have been paid.**
1. **Liabilities are the value of a company before obligations are paid.**
- This statement is false. Liabilities represent the obligations of a company (amounts owed) and do not directly represent the value of the company.
2. **Equity is the value of a company before obligations are paid.**
- This statement is also false. Equity represents the ownership interest in the company and is calculated after liabilities are subtracted from assets.
3. **Equity is the remaining value in a company after all liabilities have been paid.**
- This statement is true. Equity is calculated as total assets minus total liabilities, representing the residual interest of the owners after all obligations have been settled.
4. **Retained earnings are the value of the company.**
- This statement is false. Retained earnings represent the accumulated profits that have not been distributed as dividends and is a component of equity, but they do not represent the total value of the company.
In summary, the true statement is: **Equity is the remaining value in a company after all liabilities have been paid.**