What is an income statement?

An income statement is fundamentally a financial statement designed to provide a summary of a company's revenues and expenses over a specific period, typically a fiscal quarter or year. This financial statement captures the company's ability to generate profit by comparing the total revenues earned during that period with the total expenses incurred.

By presenting this information, the income statement allows stakeholders to evaluate the operational efficiency of the business, understand its profitability, and assess its performance relative to previous periods or industry benchmarks. It typically includes key figures such as gross profit, operating income, and net income, culminating in a clear picture of the company’s financial health over the specified time frame.

In contrast, a summary of a company's assets would refer to a balance sheet, while a report on ownership pertains to shareholder equity and stock ownership. A detailed balance sheet focuses on a company’s assets, liabilities, and equity rather than its operational results. Thus, the income statement is essential for assessing the ongoing financial performance and viability of a business.