This also enables them to find and fix small business problems before they become large and expensive. Based on their analysis, they can come up with the best solutions to yield more profit.įollowing are the few other things that an income statement informs.įrequent reports: While other financial statements are published annually, the income statement is generated either quarterly or monthly. Due to this, business owners and investors can track the performance of the business closely and make informed decisions. The business owners can refer to this document to see if the strategies have paid off. Importance of an income statementĪn income statement helps business owners decide whether they can generate profit by increasing revenues, by decreasing costs, or both. It also shows the effectiveness of the strategies that the business set at the beginning of a financial period. The income statement is also known as a profit and loss statement, statement of operation, statement of financial result or income, or earnings statement. It also shows whether a company is making profit or loss for a given period. The income statement, along with balance sheet and cash flow statement, helps you understand the financial health of your business. Reading Time: 5 minutes What is income statement?Īn income statement is a financial statement that shows you the company’s income and expenditures.
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