Which of the following questions can be answered by reviewing a firm's balance sheet?

• A. How much revenue did the company earn during the year?
• B. How much cash did the company generate from operating activities?
• C. What is the total value of the company's assets at a specific point in time?
• D. What were the company's total expenses for the period?

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the purpose of a balance sheet. A balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time. It includes three main components: assets, liabilities, and equity.
2. Step 2: Analyze the question options. The balance sheet does not provide information about revenue, expenses, or cash flows, as these are typically found in the income statement and cash flow statement. Instead, the balance sheet focuses on the company's financial position, including the total value of assets, liabilities, and equity.
3. Step 3: Identify the correct question that aligns with the balance sheet's purpose. The balance sheet answers questions related to the total value of the company's assets, liabilities, and equity at a specific point in time.
4. Step 4: Exclude irrelevant questions. Questions about revenue, expenses, and cash generated from operating activities are not answered by the balance sheet, as these pertain to other financial statements like the income statement and cash flow statement.
5. Step 5: Conclude that the correct answer is: 'What is the total value of the company's assets at a specific point in time?' This aligns with the information provided by the balance sheet.