Stockholders would most likely use accounting information provided by their firm to:
A) make capital budgeting decisions and financial forecasts.
B) gauge whether the firm has made a strong return on their investment.
C) determine whether the firm can repay them for the orders it places.
D) obtain information needed to satisfy legal reporting requirements.

Question

Quizplus · Accepted Answer

Stockholders use accounting information to evaluate the profitability of their investment, which can be determined by measuring the firm's return on investment (ROI). This helps them gauge whether the investment was a good decision and whether they should continue to hold, sell or purchase more shares in the company. A is incorrect because capital budgeting decisions require more detailed financial analysis than what is typically found in financial statements. C is incorrect because accounting information does not provide insight into the firm's ability to repay outstanding orders. D is incorrect because legal reporting requirements are primarily satisfied through regulatory filings and disclosure rather than financial statements.

Stockholders Would Most Likely Use Accounting Information Provided by Their