hat is true?

Question

Equity is the value of a company before obligations are paid.

Liabilities are 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.

Answer 1

The correct statement is:

Equity is the remaining value in a company after all liabilities have been paid.

To clarify the other statements:

1. Equity is the value of a company before obligations are paid. - This is false. Equity is actually the value that remains after all liabilities (obligations) have been deducted from the company's assets.

2. Liabilities are the value of a company before obligations are paid. - This is misleading. Liabilities represent the obligations or debts of a company, not its value.

3. Retained earnings are the value of the company. - This is also misleading. Retained earnings are a part of equity, representing the cumulative amount of net income that a company has retained, rather than distributed as dividends. They contribute to the overall equity, but do not represent the entire value of the company by themselves.

In summary, the third statement about equity is the accurate representation.