Final answer:
Merchandise inventory is a balance sheet asset because it represents items of value that a business owns and intends to sell to generate revenue. In contrast, liabilities are debts the business owes.
Step-by-step explanation:
Merchandise inventory is considered a balance sheet asset. An asset is an item of value that a firm or an individual owns. In the context of business and finance, merchandise inventory represents items that a business holds with the intent to sell them to customers.
Therefore, it is classified as an asset because it holds value and can be sold to generate revenue for the business.
Conversely, a liability, such as a mortgage or a loan, is something that the business owes. The balance sheet of a company or a bank will list both assets and liabilities to showcase the organization's overall financial health.
The net worth of a company or a bank is its total assets minus its total liabilities, also known as bank capital in a banking context.