Lucy has prepared her personal balance sheet and found that her total assets are $54,000 and her total liabilities (largely college loans) are $48,000. This indicates that Lucy's:
A) net income is only $6,000.
B) net worth is $6,000.
C) cash flow will not be sufficient to repay her college loans.
D) balance sheet is out of balance.

Question

Quizplus · Accepted Answer

Lucy's net worth is calculated as assets minus liabilities, which gives a value of $6,000 ($54,000 - $48,000). This represents the amount of equity that Lucy has in her assets, and is also known as owner's equity. The other answer choices are incorrect; net income cannot be determined from a balance sheet alone, cash flow is not directly related to the balance sheet, and if the balance sheet is prepared correctly, it should be in balance (meaning the total assets equal the total liabilities plus owner's equity).

Lucy Has Prepared Her Personal Balance Sheet and Found That