What is the primary function of the income statement?

The primary function of the income statement is to show revenue and expenses over a specific period, providing insights into a company's profitability. This financial statement details how much money the company has earned (revenues) and the costs incurred (expenses) during a designated timeframe, typically a quarter or a year. By clearly presenting these figures, the income statement allows stakeholders to assess the company’s operational performance, understand how efficiently it is managing its resources, and evaluate its overall financial health.

This focus on revenues and expenses is essential for investors, management, and analysts as it allows for the evaluation of past performance and helps predict future profitability. Understanding the income statement is critical for making informed decisions regarding investments, budgeting, and strategic planning.