Which financial statement would indicate whether the company relies more on debt or shareholders' equity to finance its assets?
A)Statement of cash flows
B)Statement of changes in equity
C)Income statement
D)Statement of financial position

Question

Quizplus · Accepted Answer

The statement of financial position, also known as the balance sheet, shows the company's assets, liabilities, and shareholders' equity. It reveals whether the company has more debt or equity financing by comparing the total liabilities (which includes debt) to the total shareholders' equity. If the liabilities are greater than equity, then the company relies more on debt to finance its assets. If equity is greater than liabilities, then the company relies more on shareholders' equity. Therefore, the statement of financial position is the best choice to find out how a company is financing its assets.

Which Financial Statement Would Indicate Whether the Company Relies More