Financial Statement Showing Company Indebtedness

Question:

Which financial statement best reveals to investors and creditors information about a company’s indebtedness?

A) Statement of cash flows

B) Income statement

C) Balance sheet

D) Statement of stockholders’ equity

Answer:

C) Balance sheet

Explanation: The balance sheet is the financial statement that best reveals information about a company’s indebtedness. It provides a snapshot of the company’s financial position at a specific point in time, detailing assets, liabilities, and equity. Investors and creditors can assess the company’s debt and financial health level by reviewing the liabilities section of the balance sheet.