Final answer:
Financial accounting summarizes information and provides a basis for further analysis, rather than directly identifying or explaining problems. Imperfect information and corporate governance play critical roles in the patterns observed in how firms choose between sources of financial capital. The correct option is D.
Step-by-step explanation:
Financial accounting information primarily summarizes information but does not specifically identify or explain what is wrong within a business. Rather, it acts as a tool to provide a foundation from which analysts, investors, and managers can infer whether there might be issues that require further investigation.
Businesses decide how to obtain financial capital based on patterns that are explained by imperfect information. This concept acknowledges that the sellers (in this case, the executives of the company) typically have more information regarding the potential for future profits than the buyers (the outside investors) do.
Moreover, corporate governance plays a key role in overseeing executives and ensuring that accurate information is available. However, failures in corporate governance, as seen in the case of Lehman Brothers, can lead to inadequate supervision and imperfections in the information provided to investors.