What small business activity will likely increase owners' equity?

Prepare for the MoCA Business Test. Study with flashcards and multiple choice questions, each question has hints and explanations. Get ready for your exam!

The activity that will likely increase owners' equity is realizing a net profit at the end of a period. When a business generates a net profit, it contributes to the overall equity of the owners. This profit can be either retained within the business for reinvestment or distributed as dividends, but in either case, it increases the net assets of the business. Increased net assets directly enhance the owners' equity on the balance sheet, reflecting better financial health and a potential for growth.

In contrast, taking on additional debt does not increase owners' equity; rather, it increases liabilities. Increasing expenses significantly can lead to a reduction in net profit, thereby decreasing owners' equity. Finally, issuing more shares without profit may increase the number of shares outstanding but does not inherently lead to an increase in the value of equity without a corresponding increase in retained earnings or overall business profitability.

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