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3 April, 17:02

Suppose that Cheryl's only assets are an automobile worth $10,000 and a checking account with a $5,000 balance. Her only liabilities are a student loan balance of $2,000 and a balance of $8,000 on her car loan. What is her net worth?

a) 10,000

b) 8,000

c) 5,000

d) 2,000

e) none of the above

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  1. 3 April, 17:13
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    Cheryl's net worth is;

    c). $5,000

    Explanation:

    The net worth is the value of an individual taking into account all the individual's assets and liabilities. It is a holistic view on the value of an individual. It is also used to estimate the value of a company, corporation and even countries. It is one of the standard measures used to gauge an entity's wealth. The net worth can be calculated by taking the difference between assets and liabilities. An asset is anything of economic value that is owned by an entity while a liability is anything of economic value that is owed.

    The following formula can be used to estimate Cheryl's net worth;

    N=A-L

    where;

    N=net worth

    A=assets

    L=liabilities

    In our case;

    N=unknown to be determine

    A=Automobile+checking account

    Automobile=$10,000 and checking account=$5,000

    A=10,000+5,000=$15,000

    L=student loan+car loan

    student loan=$2,000

    car loan=$8,000

    L=2,000+8,000=$10,000

    replacing;

    N=15,000-10,000=$5,000

    Cheryl's net worth=$5,000
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