Shareholders' equity is another common term for which of the following?

• A. Total liabilities
• B. Retained earnings
• C. Owner's equity
• D. Total assets

Answer: (C)

Verified step by step guidance

1. Understand the concept of Shareholders' Equity: Shareholders' equity represents the owners' claim on the assets of a company after all liabilities have been deducted. It is also referred to as Owner's Equity.
2. Break down the components of Shareholders' Equity: It typically includes common stock, preferred stock, retained earnings, and additional paid-in capital. These are the funds contributed by shareholders and the profits retained by the company.
3. Clarify why Shareholders' Equity is not Total Liabilities: Total liabilities represent the obligations a company owes to external parties, such as loans and accounts payable, and are not part of the owners' claim.
4. Clarify why Shareholders' Equity is not Retained Earnings alone: Retained earnings are a part of Shareholders' Equity but do not encompass the entire equity. Shareholders' Equity includes other components like contributed capital.
5. Clarify why Shareholders' Equity is not Total Assets: Total assets represent everything a company owns, including liabilities and equity. Shareholders' Equity is the portion of assets remaining after liabilities are subtracted.