Which financial statement is used to calculate the return on investment for shareholders?Question 18Answera.Balance sheetb.Income statementc.Statement of retained earningsd.Statement of cash flows
Question
Which financial statement is used to calculate the return on investment for shareholders?Question 18Answera.Balance sheetb.Income statementc.Statement of retained earningsd.Statement of cash flows
Solution
The financial statement used to calculate the return on investment for shareholders is the Income Statement (b).
Here's a step-by-step explanation:
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The Income Statement provides information about a company's revenues and expenses, which are used to calculate its net income or profit.
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The net income is then used to calculate the return on investment (ROI) for shareholders.
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ROI is calculated by dividing the net income by the shareholders' equity (which can be found on the Balance Sheet).
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Therefore, while the Balance Sheet is also involved in the calculation, the Income Statement is the primary financial statement used to calculate ROI for shareholders.
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