CPIM Practice Exam 2026 – 400 Free Practice Questions to Pass the Exam

Question: 1 / 940

Which equation represents the balance sheet structure?

Liabilities = Assets + Owners' Equity

Assets = Liabilities + Owners' Equity

The balance sheet structure is fundamentally represented by the equation where assets equal the sum of liabilities and owners' equity. This reflects the accounting equation that ensures the financial stability of a company.

In essence, assets represent everything a company owns and controls, while liabilities represent what it owes to external parties (creditors) and owners' equity indicates the residual interest of the owners in the company after liabilities are deducted from assets. By stating that assets equal the sum of liabilities and owners' equity, this equation shows that resources are financed either through borrowing (liabilities) or through investor contributions (owners' equity).

This relationship is critical for understanding how a company's resources are funded and provides insights into financial health, indicating how well it can meet its obligations and the net worth available to shareholders.

Get further explanation with Examzify DeepDiveBeta

Assets - Owners' Equity = Liabilities

Owners' Equity = Liabilities - Assets

Next Question

Report this question

Download CPIM Practice Exam PDF Study Guide
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy