Which transaction would increase the financial equity of a business?

Increasing the financial equity of a business refers to boosting the owner’s claim on the assets of the business after all liabilities have been accounted for. When an owner invests money or assets into the business, this action directly increases the equity in the business. The investment can take many forms, such as cash, equipment, or other resources, and it directly adds to the overall capital available to the business.

In contrast, withdrawals by the owner decrease equity because these transactions reduce the amount of capital the owner has in the business. Purchasing inventory on credit does not increase equity since it creates a liability without additional investment into the business. Lastly, when liabilities are paid, it does not directly increase equity, as it simply reduces both assets and liabilities, with equity remaining unchanged in the immediate term.

Thus, the transaction that increases the financial equity of a business is indeed an investment made by the owner into the business.