Which financial statement would show the profitability of a company over a period of time?

Which financial statement would show the profitability of a company over a period of time?

• A. Balance Sheet
• B. Cash Flow Statement
• C. Income Statement
• D. Dividends

Answer: (C)

Profitability over a period is shown by the income statement. It sums up all revenues and expenses for a specific timeframe (like a quarter or year) to reveal net income or loss, giving a clear view of how profitable the company was during that period. The balance sheet, in contrast, is a snapshot of financial position at a single date, listing assets, liabilities, and equity rather than earnings over time. The cash flow statement tracks actual cash movements—operating, investing, and financing—highlighting liquidity and cash generation rather than overall profitability. Dividends are distributions to shareholders, not a financial statement that reports earnings.

Profitability over a period is shown by the income statement. It sums up all revenues and expenses for a specific timeframe (like a quarter or year) to reveal net income or loss, giving a clear view of how profitable the company was during that period. The balance sheet, in contrast, is a snapshot of financial position at a single date, listing assets, liabilities, and equity rather than earnings over time. The cash flow statement tracks actual cash movements—operating, investing, and financing—highlighting liquidity and cash generation rather than overall profitability. Dividends are distributions to shareholders, not a financial statement that reports earnings.