Shareholders’ equity is best defined as:
A)the residual value of a firm.
B)positive net working capital.
C)the net liquidity of a firm.
D)cash inflows minus cash outflows.
E)the cumulative profits of a firm over time.

Question

Shareholders&rsquo; equity is best defined as:
A)the residual value of a firm.
B)positive net working capital.
C)the net liquidity of a firm.
D)cash inflows minus cash outflows.
E)the cumulative profits of a firm over time.

Quizplus · Accepted Answer

Shareholders' equity refers to the ownership interest in a company, which is calculated as the residual value of assets minus liabilities. In other words, it is the amount of assets that would remain after all liabilities are paid off. Therefore, option A - the residual value of a firm - is the best definition of shareholders' equity. Options B, C, D, and E are not accurate descriptions of shareholders' equity.

Shareholders’ Equity Is Best Defined As