Question

The Income statement is the most important financial statement of the four major financial statements. Do you agree or disagree? Explain your position.

Answer 1

yes i strongly believe that income statement is the most important financial statement of all it is because -

The income statement is important because it clearly states whether a company is making a profit.

This statement shows both the growth in ‘top line’ as well as the ‘bottom line’: the former being the sales or revenue and the latter is the net income or net earnings of the firm. Net income is generally used as a measure to see how successfully the company made money during the period for which the statement was prepared. Another important element that is part of the statement is the expenses made by the firm to generate the income.

Other notable expenses that are part of the income statement are those of research and development and the interest paid on borrowed funds. If the latter is high, the company could look at other cheaper sources for funds.

The income statement of a company may be updated on a more regular basis than the other financial documents. Because the income statement provides a clear picture of current profitability, a company's managers and investors constantly review it. This gives the company an incentive to publish its income statement on a more regular basis to help its operations.