Dave examines the ______ when he wants to know the value of his company’s assets and liabilities.

• A. statement of retained earnings
• B. statement of cash flows
• C. income statement
• D. balance sheet

Answer: (D)

Verified step by step guidance

1. Understand the purpose of the balance sheet: The balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time. It lists the company's assets, liabilities, and equity.
2. Recognize the components of the balance sheet: Assets represent what the company owns, liabilities represent what the company owes, and equity represents the residual interest of the owners after liabilities are subtracted from assets.
3. Compare the balance sheet to other financial statements: The statement of retained earnings shows changes in retained earnings, the statement of cash flows tracks cash inflows and outflows, and the income statement reports revenues and expenses over a period. None of these provide a direct snapshot of assets and liabilities like the balance sheet does.
4. Identify the relevance of the balance sheet for Dave: When Dave wants to know the value of his company’s assets and liabilities, the balance sheet is the correct financial statement to examine because it directly lists these values.
5. Conclude that the balance sheet is the correct answer: Based on the explanation above, the balance sheet is the financial statement Dave should refer to for understanding the value of his company’s assets and liabilities.