Which term describes the value of a business after subtracting long-term liabilities from total assets?

Which term describes the value of a business after subtracting long-term liabilities from total assets?

• A. Capital structure
• B. Market value
• C. Current assets
• D. Net assets

Answer: (D)

The concept here is the residual value of the business after accounting for its obligations. In accounting terms, what’s left of the assets once you subtract liabilities represents the owners’ claim on the company—the equity or net assets. Subtracting long‑term liabilities from total assets isolates the portion financed beyond current obligations, leaving the value attributable to owners as net assets. Net assets is the best fit because it describes this residual value precisely: assets minus liabilities equals the owners’ claim. The other terms describe different ideas: capital structure is about how a business finances itself (debt vs. equity), market value is the current price someone would pay for the business, and current assets are only the short-term assets.

The concept here is the residual value of the business after accounting for its obligations. In accounting terms, what’s left of the assets once you subtract liabilities represents the owners’ claim on the company—the equity or net assets. Subtracting long‑term liabilities from total assets isolates the portion financed beyond current obligations, leaving the value attributable to owners as net assets.

Net assets is the best fit because it describes this residual value precisely: assets minus liabilities equals the owners’ claim. The other terms describe different ideas: capital structure is about how a business finances itself (debt vs. equity), market value is the current price someone would pay for the business, and current assets are only the short-term assets.