Which of the following questions about the current state of Streeter &

QUESTION

Which of the following questions about the current state of Streeter & Sons would a balance sheet NOT be able to help answer?

A) Is it a good time for the business to grow?
B) Can the company survive a season of low revenues?
C) Does the company have too many employees?
D) Can the company take on more debt?
E) What is the value of the company’s assets?

ANSWER

Answer: C
Explanation: C) Although employees who have provided labor but have not yet been paid represent a liability, salaries are not considered on the balance sheet but are considered on the income statement as operating expenses. In any case, salary expenses may or may not indicate whether a company has too many employees. A balance sheet gives information about the level of a company’s assets (Choice E) versus liabilities. This information can indicate whether the company has resources to grow (Choice A), can survive low revenues (Choice B), or has too much debt (Choice D).