1) Which of these is not a characteristic of equity? a- It is what is "left...

1) Which of these is not a characteristic of equity?

a- It is what is "left over" after deducting liabilities from assets.

b- It represents debts of the company.

c- It is diminished by unprofitable operations.

d- It cannot be calculated independently of assets and liabilities

Solutions

Expert Solution

Correct answer:

Option(b) or It represents debts of the company is the correct answer because it does not represent the debt of the company but it represents the ownership of the company. They have voting rights and can participate in the management.The are known as ' commmon stock holders'.

Incorrect Answers:

Option (a) or It is what is "left over" after deducting liabilities from assets is an incorrect answer because it is calculated by deducting the total liabilities from the total assets.

Option (c) or It is diminished by unprofitable operations is an incorrect answer because it is the charactseristic of the equity.

Option (d) or It cannot be calculated independently of assets and liabilities is an incorrect answer because equity is calculated by taking the difference between the the total assets and the total liabilities.

So correct answer is option (b)

ekkarill92 answered 2 years ago

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