Certified Human Resource Professional (CHRP) Practice Exam

Which of the following describes assets?

1. What an organization owes to its creditors.

2. The total amount of investments in an organization.

3. Things of value owned by an organization.

4. Revenue minus expenses.

The correct answer is: Things of value owned by an organization.

The correct answer describes assets as "Things of value owned by an organization." Assets are fundamental components of a company's balance sheet and represent resources that provide economic benefits to the organization. They can include tangible items like buildings, machinery, inventory, and cash, as well as intangible items such as patents, trademarks, and goodwill. Understanding this concept is crucial in finance and accounting as it helps determine a company's overall financial health and stability. Assets are essential because they are used in the operations of the organization, contribute to generating revenue, and can be converted into cash when needed. In contrast, the other options do not accurately reflect what assets are. The characterization of what an organization owes to its creditors pertains to liabilities, not assets. The total amount of investments in an organization could be a part of assets but does not capture the broader definition, which encompasses all owned resources. Lastly, revenue minus expenses describes net income or profit, which is a measure of profitability rather than a definition of assets.