A potential investor interested in predicting the earnings of a company in the future should examine the:
A)Balance Sheet only.
B)Income Statement only.
C)Statement of Retained Earnings.
D)statement of Retained Earnings and Balance Sheet.

Question

Quizplus · Accepted Answer

The Income Statement provides information about the company's revenue, expenses, and net income over a specific period of time. This information is essential in predicting a company's earnings in the future. The Balance Sheet provides information about the company's assets, liabilities, and equity at a specific point in time, which is also useful but not as directly relevant to predicting future earnings. The Statement of Retained Earnings shows changes in the retained earnings account over a specific period of time, but it is not as comprehensive as the Income Statement. Therefore, the best choice for predicting earnings would be to examine the Income Statement only.

A Potential Investor Interested in Predicting the Earnings of a Company