Machvile Corporation, a robotics company, decides to acquire Chancera Inc., a start-up company that operates within the same industry. To better assess its decision, the management of Machvile Corporation needs to find out the value of Chancera Inc.'s total assets. The management has information regarding Chancera Inc.'s liabilities and stockholders' equity. In this scenario, the management should most likely use the _____ to get the required information.
A) accounting equation
B) profitability index
C) quartic equation
D) liquidity index

Question

Quizplus · Accepted Answer

The accounting equation states that assets = liabilities + stockholders' equity. Therefore, the management of Machvile Corporation can use the accounting equation to find the value of Chancera Inc.'s total assets by subtracting the liabilities from the stockholders' equity.

Machvile Corporation, a Robotics Company, Decides to Acquire Chancera Inc