Business EOPA Practice Exam

Question: 1 / 400

What does the term 'shareholders' equity' signify?

Money invested in the company by management

The remaining amount of assets after liabilities have been deducted

Shareholders' equity represents the residual interest in the assets of a company after all liabilities have been settled. This means it reflects what the owners of the company (the shareholders) actually own once all obligations to creditors have been fulfilled. It serves as a key indicator of a company's financial health, as it shows the value that is attributable to shareholders.

In contrast to the other options, which either misrepresent what is included in shareholders' equity or pertain to different financial metrics, this option accurately captures the essence of shareholders' equity. It encompasses not only the initial capital invested but also retained earnings and other comprehensive income that the business has generated over time, contributing to the overall worth of the company as seen from the shareholders' perspective.

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The income earned by shareholders

The total liabilities owed by the company

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