Which of the following best defines owners' equity?

Owners' equity represents the owners' claim on the assets of a business after all liabilities have been settled. It is calculated by subtracting total liabilities from total assets, which reflects the net worth of the business from the perspective of its owners. This residual amount indicates how much of the company's assets are financed by the owners' investments after accounting for what the company owes (liabilities). Therefore, the correct definition provided emphasizes the relationship between assets and liabilities, highlighting the essence of what owners' equity truly represents.

The other options do not accurately capture the concept of owners' equity. The total liabilities of an entity simply reflect the debts and obligations that the company must pay, without factoring in the owners' residual interest. The sum of assets and liabilities does not define owners' equity; rather, it totals both what the company owns and what it owes, which is not how owners' equity is determined. The total revenue generated by the business relates to income earned from operations but is not a measure of owners' equity, which focuses on the financial position of the business rather than its income generation.