What equation represents the relationship of total assets in a company's financial statements?

The equation that accurately represents the relationship of total assets in a company's financial statements is derived from the fundamental accounting equation, which states that assets are equal to liabilities plus shareholders' equity. This means that the resources owned by a company (total assets) are funded by obligations to creditors (total liabilities) and investments by shareholders (stockholders' equity).

In this context, choosing the equation that states that total assets are equal to the sum of total liabilities and stockholders' equity confirms the foundational concept of double-entry accounting. This principle shows that every financial transaction affects at least two accounts, maintaining the balance within the equation.

Thus, the equation Total Liabilities + Stockholders' Equity correctly reflects this relationship, demonstrating how a company's assets are financed through liabilities and the equity of its owners. It ensures that all resources owned by the company are accounted for in relation to what it owes and the equity stake of its shareholders.