Which Of The Following Formulas Determines A Customer's Net Worth?

The correct answer of this Multiple Choice Question (MCQ) is D), as the Net Worth is the difference total assets minus total liabilities. It is calculated from the following Accounting Equation:

Net Worth (Owner's Equity Or Capital)  =  Total Assets - Total Liabilities (Rights of Outsiders)

Net worth is the rights of the owner against the assets of the business.

The more the customer has assets greater than total liabilities, the more stronger' net worth (positive net worth) of the customer has during the period. However, negative net worth (liabilities are greater than assets) indicates that the business is unable to meet its external and internal liabilities which is not a good sign for running a smooth business.

Assets are owned, possessed and controlled by the customer's business are enforced by valid claims against the rights from outsiders and owner of the business while liabilities are debts due which are payable to outsiders against the assets of the business.a