The basic asset-liability equation, assets = liabilities + shareholder equity implies:
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A. B. C. D.B
The asset-liability equation has the results of investing activities on the left-hand side as assets. On the right hand side are results of creditor financing (debt) and equity financing.
The basic asset-liability equation, assets = liabilities + shareholder equity, is a fundamental accounting equation that represents the relationship between a company's assets, liabilities, and shareholder equity.
Assets refer to the economic resources owned or controlled by a company, which can include cash, inventory, property, equipment, investments, and accounts receivable. These assets represent the value that a company has available to generate future economic benefits.
Liabilities, on the other hand, represent the company's obligations or debts to external parties, such as loans, accounts payable, and accrued expenses. Liabilities reflect the claims that creditors have on the company's assets.
Shareholder equity, also known as owner's equity or stockholders' equity, represents the residual interest in the assets of the company after deducting liabilities. It represents the shareholders' claim on the company's assets and is calculated by subtracting total liabilities from total assets. Shareholder equity can include components such as common stock, retained earnings, and additional paid-in capital.
Now let's analyze the answer choices:
A. operating activities = financing activities: This option suggests that the equation assets = liabilities + shareholder equity implies that operating activities, which involve the day-to-day activities of a business, are equal to financing activities, which involve raising funds and managing debt and equity. However, the asset-liability equation does not directly imply this relationship, so this answer is incorrect.
B. investing activities = financing activities: This option suggests that the equation assets = liabilities + shareholder equity implies that investing activities, which involve acquiring and disposing of long-term assets, are equal to financing activities. Again, this relationship is not directly implied by the asset-liability equation, so this answer is incorrect.
C. investing activities = operating activities: This option suggests that the equation assets = liabilities + shareholder equity implies that investing activities are equal to operating activities. However, this is also incorrect. Investing activities and operating activities are distinct categories in financial reporting, and the asset-liability equation does not equate the two.
D. none of these answers: Given the analysis above, this answer is correct. None of the provided answer choices accurately reflects the implications of the basic asset-liability equation.
In summary, the correct answer is D. none of these answers. The basic asset-liability equation, assets = liabilities + shareholder equity, does not directly imply any of the relationships stated in the answer choices. It is a fundamental equation in accounting that represents the relationship between a company's assets, liabilities, and shareholder equity.