North Carolina Building Contractor License Practice Exam

Which of the following would be considered a company's asset?

1. Liabilities

2. Cash holding of the company

3. Long-term debt

4. Equity

The correct answer is: Cash holding of the company

A company's asset refers to resources owned by the company that have economic value and can provide future benefits. In this context, cash holdings of the company are categorized as an asset because cash is a liquid asset readily available for use in operations, investments, and obligations. It represents direct ownership and contributes positively to the company's overall financial health. Liabilities, on the other hand, are financial obligations or debts that the company owes to outsiders, which do not contribute to the asset side but rather indicate a claim against the company's resources. Long-term debt also falls under liabilities and reflects amounts borrowed that need to be repaid over an extended period, meaning it does not represent an asset. Equity refers to the ownership interest in the company, which derives from the assets and liabilities but does not represent a direct resource the company owns. Therefore, the presence of cash holdings in the list clearly identifies it as an asset.