Question

Ashton is an investor looking at the income statements of two different companies. The first company has a very detailed income statement, and the second company has a very condensed income statement. Which company is Ashton more likely to invest in? Why?

Answer 1

Answer:

The first company with detailed information.

Explanation:

Financial statements show the financial position of a company at a particular period in time. The various types are balance sheet, income statement, and cash flow statement.

The income statement shows more clearly value of the company.

When Ashton is studying the income statement, he will need as much detail as possible so that he can make informed decision to invest.

The company with detailed income statement will be a better option. The company with condensed income statement will most likely not reveal some important information that will present itself as an unpleasant surprise in the future.