Shareholders' equity:
A)increases in value anytime total assets increases.
B)is equal to total assets plus total liabilities.
C)decreases whenever new shares of stock are issued.
D)includes long-term debt, preferred stock, and common stock.
E)represents the residual value of a firm.

Question

Quizplus · Accepted Answer

Shareholders' equity represents the residual value of a firm, which is the value remaining after subtracting total liabilities from total assets. It is composed of common stock, retained earnings, and other comprehensive income. Shareholders' equity does not increase whenever total assets increase, nor does it include long-term debt or preferred stock. Additionally, issuing new shares of stock may or may not affect shareholders' equity, depending on the specific circumstances.

Shareholders' Equity