Question

Q5.An increase in one asset is accompanied by
a)Decrease in an asset b) Increase in another liability
Increase in Capital d) All of these​

Answer 1

d) All of these

• An increase in assets is usually a sign that a company is growing, but anyone can tell that there is more going on behind the scenes than just a look at assets.
• The goal is to determine how the growth of the company's assets can be financed.
• What we need is the last years of the company's balance sheet and a simple accounting formula. Assets = Liabilities Equity Equity A company's assets are what it owns.
• Common examples of assets include: Equipment to make food, buildings to own, raw materials to make food, stock of food to sell, cash in the bank.
• Think about your home. Cars, houses, furniture, televisions, computers, bank accounts, etc. Increasing wealth is usually a sign of business prosperity, but anyone can understand that this is more than just luck.
• Returning to the house example, imagine that you see a charming area of the sparkling brand new BMW in a trendy Italian suit, chatting with her latest smartphone and asking if she can stay home for two weeks cruising the Caribbean.
• You might think that it is getting bigger and bigger. Right? He may have received a large bonus for a job or a promotion.
• He may be able to accumulate debts (liabilities) to finance his assets.
• You may not know what options apply to your neighbors, but fortunately the SEC requires state-owned enterprises to be a little more transparent about their finances than their neighbors.
• A business makes it easy to determine whether an asset (such as a BMW or a neighbor's house) is the result of a thriving business that can generate the cash needed to pay for the asset, or whether the asset is funded by debt. Take another look at the balance equation. Assets = Liabilities.

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