The owner's stake in the company is defined as:

The owner's stake in the company is defined as:

• A. Liabilities
• B. Assets
• C. Revenue
• D. Equity

Answer: (D)

Equity is the owner’s stake in the business—it's the residual interest in the company’s assets after all debts have been paid. In other words, it represents the owners’ claim to what the company owns once liabilities are settled. This concept fits the basic accounting equation: Assets = Liabilities + Equity. Equity grows when the business earns profits or owners contribute capital, and it shrinks with losses or withdrawals. For example, if a company has assets of 100 and liabilities of 40, the owner’s equity is 60. Revenue is income the business earns, assets are resources owned, and liabilities are what the company owes; none of those describe ownership as directly as equity does.

Equity is the owner’s stake in the business—it's the residual interest in the company’s assets after all debts have been paid. In other words, it represents the owners’ claim to what the company owns once liabilities are settled. This concept fits the basic accounting equation: Assets = Liabilities + Equity. Equity grows when the business earns profits or owners contribute capital, and it shrinks with losses or withdrawals. For example, if a company has assets of 100 and liabilities of 40, the owner’s equity is 60. Revenue is income the business earns, assets are resources owned, and liabilities are what the company owes; none of those describe ownership as directly as equity does.