What does an income statement reflect about profitability over a period?

• A. Net income or loss after subtracting expenses from revenues.
• B. Total assets at the end of period.
• C. Cash on hand at start of period.
• D. Market share gained during period.

Answer: (A)

An income statement measures profitability over a period by bringing together all the revenues and all the expenses for that span and showing the result after subtracting the expenses from the revenues. This yields net income if revenues exceed costs, or a net loss if costs exceed revenues, highlighting how much profit the business actually earned during the period. This focus on earnings over time is what distinguishes it from other statements: the balance sheet lists total assets at a point in time, the cash flow statement tracks cash movements, and market share is a market metric rather than a measure of profit. So the line that shows net income or loss after subtracting expenses from revenues is the best indicator of profitability on the income statement.