Final answer:
The balance sheet equation is best illustrated by the formula Assets = Liabilities + Stockholders' Equity, which shows the relationship between what a company owns, what it owes, and what is left for the owners after settling its debts.
Step-by-step explanation:
The balance sheet equation is best illustrated by the formula Assets = Liabilities + Stockholders' Equity.
For example, if a company has $10,000 in assets, $5,000 in liabilities, and $5,000 in stockholders' equity, the equation would hold true: $10,000 = $5,000 + $5,000.
This equation shows the relationship between what a company owns (assets), what it owes (liabilities), and what is left for the owners (stockholders' equity) after settling its debts.