Question

Which of the following statements is CORRECT?A. Shareholder's equity is the residual value of a firmB. Net working capital must be a positive valueC. An increase in cash reduces the liquidity of a firmD. Equipment is generally considered a highly liquid asset

Answer 1

Answer:

The correct answer is letter "A": Shareholder's equity is the residual value of a firm.

Explanation:

Shareholders' equity is a measure of a company's net worth. I can be calculated by subtracting the company's total liabilities from its assets. It is also understood as the funds remaining after all creditors and debts are paid that is why we could say it is the residual value of the firm.