Question

How do you calculate a net worth statement?

Question 1 options:

a.Assets - Liabilities


b.Assets + Liabilities


c.Assets x Liabilities


d.Assets / Liabilities

Answer 1

a. Assets - Liabilities

Explanation:

Assets/Liabilities is a management method to minimize risk. So, it cannot be the answer.

There is no formula like "Assets + Liabilities" and "Assets x Liabilities" in accounting to calculate the net worth. Therefore, those can be eliminated.

We know that net worth is calculated by deducting all liabilities (long-term and short-term) from net assets. Therefore, option (a) is the correct answer.