Final answer:
Losses decrease owner’s equity by reducing the net assets of a company. Investments by owners and gains increase it, whereas short-term loans affect liabilities, not owner's equity directly.
Step-by-step explanation:
Among the choices given, B. losses decrease owner’s equity. Owner’s equity is essentially the residual interest in the assets of an entity after deducting liabilities.
When a company experiences losses, it reduces the net assets, thereby reducing the owner’s equity.
In contrast, investments by the owners increase the owner’s equity, gains result in an increase, and short-term loans do not directly affect owner’s equity as they are considered liabilities.