To determine which item is included in net worth, we need to understand what net worth represents. Net worth is essentially the difference between total assets and total liabilities, and it reflects the overall financial health of an individual or a company.
Now, let’s look at the options provided:
- a) Retained Earnings: This refers to the cumulative amount of net income that has been retained in the company rather than distributed as dividends. It is indeed part of the equity section of the balance sheet and contributes to net worth.
- b) Common Stock: This represents the ownership shares in a corporation and is part of equity as well. It indicates the value contributed by shareholders and also contributes to the net worth.
- c) Additional Paid-in Capital: This is the amount shareholders have invested in the company over and above the par value of the stock. Like retained earnings and common stock, it is also included in the equity section and, therefore, in net worth.
Considering these points, each of the options listed (a, b, and c) contributes to a company’s net worth. Therefore, the correct answer is:
d) All of the above are included in net worth.