The finance team of an organization has prepared an end of quarter balance sheet. The stockholders equity amount is a negative value. What must be true in this situation? D. The organizations liabilities are greater than the assets. Stockholders equity is also known to many as shareholders equity. This is listed on the companies balance sheet and includes the total assets and the total liabilities subtracted then equals stockholder's equity. Since you subtract the liabilties from the assets, if there is a negative value then the liabilities are greater than the assets.
The statement which is true in this situation is the organization's liabilities are greater than its assets. Thus the correct answer is D.
A balance sheet is a document used to assess the position of a company in the market. It calculates the records of assets and liabilities of the company and calculates the profit or loss.
When the finance team of an organization has prepared an end-of-quarter balance sheet. The stockholder's equity amount is a negative value which reflects that the organization's liabilities are greater than its assets showing the position of the company as bankrupt.
When the asset exceeds liabilities it shows profits and when liabilities exceed assets it shows insolvency and it reflects the negative net worth of the company which spoils the reputation in the market among investors.
Therefore, option D is appropriate to answer.
Learn more about the Balance sheet, here:
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