Florida Building Contractor Business/Finance Practice Exam

Which financial statement summarizes revenues, costs of sales, and operating expenses over a period of time?

1. Balance Sheet

2. Cash Flow Statement

3. Income Statement

4. Equity Statement

The correct answer is: Income Statement

The Income Statement is a financial statement that provides a detailed summary of a company's revenues, costs of sales, and operating expenses over a specific period, usually a quarter or a year. This statement is essential for understanding the profitability of the business, as it ultimately shows the net income or loss by subtracting total expenses from total revenues. By presenting this information, the Income Statement allows business owners, investors, and stakeholders to assess how well the company generates profit from its operations. It reflects not only the company's financial performance but also its operational efficiency, as it highlights various revenue streams and the costs associated with generating that revenue. In contrast, other financial statements serve different purposes: the Balance Sheet outlines a company's assets, liabilities, and equity at a specific point in time, the Cash Flow Statement tracks the cash inflows and outflows over a period, providing insight into liquidity and cash management, and the Equity Statement typically details changes in equity from transactions and other events over a specified period. Therefore, the reason the Income Statement is the correct choice is due to its comprehensive summary of the company’s revenues and expenses, which are fundamental to understanding overall financial performance.