If total assets exceed total liabilities, the farm’s financial position is said to be

If total assets exceed total liabilities, the farm’s financial position is said to be

• A. Strongly capitalized
• B. Positive net worth
• C. Insolvent
• D. Unbalanced

Answer: (B)

The main concept being tested is owner’s equity, or net worth, which comes from the accounting equation: Assets minus Liabilities equals Owner’s Equity. If total assets exceed total liabilities, the owner’s equity is positive, meaning the farm has positive net worth. This indicates solvency—the ability to cover debts with assets. If liabilities were greater than assets, the farm would be insolvent (negative net worth). The term “strongly capitalized” isn’t the standard way to describe this situation, and “unbalanced” doesn’t fit financial terminology here.

The main concept being tested is owner’s equity, or net worth, which comes from the accounting equation: Assets minus Liabilities equals Owner’s Equity. If total assets exceed total liabilities, the owner’s equity is positive, meaning the farm has positive net worth. This indicates solvency—the ability to cover debts with assets.

If liabilities were greater than assets, the farm would be insolvent (negative net worth). The term “strongly capitalized” isn’t the standard way to describe this situation, and “unbalanced” doesn’t fit financial terminology here.