Which of the Following Is Correct in Matching Decisions with Information

question 59

Multiple Choice

Which of the following is correct in matching decisions with information in financial reports?

• A) Determine profitability using the balance sheet.
• B) Determine solvency using the income statement.
• C) Determine long-term borrowing using the statement of changes in equity.
• D) Determine return on investment using both the income statement and balance sheet.

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Definitions:

Stock

A type of security that signifies ownership in a corporation and represents a claim on part of the company's assets and earnings.

Material Errors

Substantial mistakes or omissions in accounting records that could influence the decision of someone relying on that information.

Financial Statements

Documents that provide an overview of a company's financial condition, including the balance sheet, income statement, and cash flow statement.

Owner Financing

A financing arrangement where the seller extends credit to the buyer to purchase the seller's property.