When preparing financial statements, which equation is evaluated to determine financial position?

The equation that is evaluated to determine financial position is Assets = Liabilities + Equity. This equation, known as the accounting equation, is foundational in accounting and reflects the balance sheet's structure. It indicates that all the resources owned by a business (assets) are financed either through debts (liabilities) or the owners' equity.

Understanding this equation is crucial for assessing the financial health of an organization. It shows how much of the organization's assets are financed by liabilities versus how much is financed through equity, which represents the owners' claim on the business after all debts have been settled. By analyzing this relationship, one can derive insights into the stability and liquidity of the organization and understand how well it is leveraging its assets.

The other options provided do not encapsulate the essential relationship that defines an organization's financial position in the same way. Therefore, the accounting equation accurately reflects the essence of how assets, liabilities, and equity interact, making it the correct choice for evaluating financial statements.