Understanding Assets and Liabilities

What is the formula for calculating assets?

• Assets = Revenue - Expenses

• Assets = Cash + Inventory

• Assets = Total Income - Total Expenses

• Assets = Liabilities + Equity

How do liabilities affect the overall capital of a business?

• Liabilities have no effect on the overall capital of a business.

• Liabilities increase the overall capital of a business by boosting net worth.

• Liabilities are considered assets that enhance the business's capital.

• Liabilities decrease the overall capital of a business by reducing net worth.

Can you give an example of a current asset?

• Prepaid Expenses

• Accounts Receivable

• Inventory

• Cash

What role do liabilities play in financial statements?

• Liabilities indicate a company's obligations and are essential for assessing financial health and risk.

• Liabilities are irrelevant to financial statements and do not affect assessments.

• Liabilities only reflect past expenses and have no impact on future obligations.

• Liabilities represent a company's assets and increase overall value.

How can understanding assets and liabilities help in financial planning?

• It helps in assessing net worth, managing cash flow, and making informed financial decisions.

• It increases the value of all assets automatically.

• It eliminates the need for budgeting entirely.

• It guarantees financial success without any planning.