What is the primary purpose of an income statement?

The primary purpose of an income statement is to summarize revenues and expenses to determine net income or loss. This financial statement provides essential insights into a company’s financial performance over a specific period, such as a quarter or a year. It details how much money a company has earned from its core operations (revenues) and the costs associated with those operations (expenses).

By subtracting total expenses from total revenues, the income statement reveals whether the company had a profit or a loss during that period. This information is critical for stakeholders, including investors, creditors, and management, as it indicates how well the company is generating profit relative to its costs.

Other choices, like listing assets and liabilities or showing the cash position, pertain to different financial statements, such as the balance sheet and the cash flow statement, respectively. These documents serve distinct purposes in presenting a company's overall financial health, but they do not provide the performance-focused insight that the income statement offers. Hence, the income statement stands out as the key report for analyzing a company’s profitability.