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Given the following information, calculate the net worth:

--->Assets = $8,000
--->Cash inflows = $6,000
--->Cash outflows = $4,500
--->Liabilities = $5,000
A) $4,500
B) $5,500
C) $6,000
D) $8,500

User LostTexan
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1 Answer

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Final answer:

To calculate the net worth, one must subtract liabilities from assets. For this student's scenario, the correct calculation after adjusting the assets with cash inflows and outflows results in a net worth of $4,500.

Step-by-step explanation:

To calculate a person's or an institution's net worth, we subtract liabilities from assets. In the context of a bank, this would be the total assets minus the total liabilities on the bank's balance sheet. The information provided for the student's question does not directly involve a bank's net worth calculation but provides a simple personal finance scenario.

The student's net worth is calculated as:

  1. Total Assets: $8,000
  2. Total Liabilities: $5,000

To find the net worth, subtract the total liabilities from the total assets:

Net Worth = Assets - Liabilities

Net Worth = $8,000 - $5,000

Net Worth = $3,000

However, this number isn't one of the provided options. Since the student might be confused about the significance of cash inflows and outflows, it's important to clarify that these figures typically affect the calculation of cash or liquid assets, but not the net worth directly unless they change the balance of current assets such as cash balances. If inflows and outflows are to be considered with assets, we adjust as follows:

  1. Adjusted Assets = Assets + Cash Inflows - Cash Outflows
  2. Adjusted Assets = $8,000 + $6,000 - $4,500
  3. Adjusted Assets = $9,500

Now, we recalculate the net worth using the adjusted assets:

Net Worth = Adjusted Assets - Liabilities

Net Worth = $9,500 - $5,000

Net Worth = $4,500

Therefore, the correct answer is A) $4,500.

User Kenji
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7.7k points