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.

Question

Quizplus · Accepted Answer

Return on investment can be determined by using both the income statement (to calculate net income) and the balance sheet (to calculate average assets and equity). Option A is incorrect because profitability is determined using the income statement, not the balance sheet. Option B is incorrect because solvency is determined using the balance sheet, not the income statement. Option C is incorrect because long-term borrowing is typically disclosed in the notes to the financial statements, not the statement of changes in equity.

Which of the Following Is Correct in Matching Decisions with Information