Final answer:
Owner's equity is the owner's interest in the business, calculated as total assets minus total liabilities. It represents what the owner would retain after all debts are paid, and for a healthy business, it should be positive, supporting financial stability. The correct answer is option A.
Step-by-step explanation:
The owner's equity is best defined as the owner's interest or worth in the business. It is the residual interest in the assets of the entity after deducting liabilities, essentially representing what the owner would have left in assets once all liabilities are paid off. For example, if the market value of a house is $200,000 and the owner owes $180,000 to the bank, then the owner's equity in the house would be $20,000. This can be similarly understood using a T-account, where on one side you have the assets and on the other the liabilities. The net worth or equity of a business is indicated as the total assets minus total liabilities, which should always equate to a positive balance for a healthy business.