Which of the following best describes a personal net worth statement?

• A. A report showing only the cash inflows and outflows of an individual.
• B. A summary of an individual's income and expenses over a specific period.
• C. A statement that lists an individual's assets and liabilities to determine their net worth using the equation: Assets \(-\) Liabilities = Net Worth.
• D. A document that records only the liabilities owed by an individual.

Answer: (C)

Verified step by step guidance

1. Understand the concept of a personal net worth statement: It is a financial document that provides a snapshot of an individual's financial position at a specific point in time by listing their assets and liabilities.
2. Recall the formula used to calculate net worth: Net Worth = Assets − Liabilities. This equation is fundamental to understanding the purpose of the statement.
3. Identify the components of the statement: Assets include items of value owned by the individual (e.g., cash, investments, property), while liabilities represent debts or obligations owed (e.g., loans, credit card balances).
4. Compare the options provided in the problem: Eliminate choices that do not align with the definition of a personal net worth statement, such as those focusing solely on cash inflows/outflows or income/expenses.
5. Select the correct answer: The option that accurately describes a personal net worth statement is the one that lists an individual's assets and liabilities to determine their net worth using the equation Assets − Liabilities = Net Worth.