Final answer:
The word that describes the rights of business owners to the assets of a company is equity. Equity is the value of assets after subtracting liabilities, indicating an owner's financial interest in the company. It reflects a company's net worth, which can be positive or negative based on financial health.
Step-by-step explanation:
The word that describes the rights of the business owner or owners to the assets of a company is equity. Equity represents the owner's stake in the company, which is the value of the assets after all liabilities have been paid off. In the context of a corporation, equity entails the shareholders' claim on the assets and earnings once the company has settled its debts. This is similar to the way equity in a home is determined: by assessing the value of the property and subtracting any outstanding mortgage or loans.
In accounting, on a balance sheet, equity is represented as the value of assets minus liabilities. For example, when a bank calculates its net worth, it subtracts total liabilities from total assets, and the resulting figure is the bank's equity, or net worth. Positive equity indicates a financially healthy company, whereas negative equity may indicate financial distress or bankruptcy.