What is the owners' equity if the company sells its inventory at a loss?

The owners' equity will decrease by the amount of the loss incurred from selling the inventory. When a company sells inventory at a loss, the loss directly impacts the bottom line, which is reflected in the income statement. Specifically, when the revenue generated from the sale of inventory is less than the cost of that inventory, the difference is recognized as a loss.

This loss reduces the company's retained earnings, which is a component of owners' equity. Since retained earnings are reduced by the loss, overall owners' equity declines accordingly. Thus, if inventory is sold at a loss, it results in a decrease in owners' equity by exactly the amount of that loss. This relationship illustrates the essential connection between operations (like selling inventory) and the owners' equity in a firm.