Asked by Jessa Gesta on May 10, 2024
Verified
Which of the following equations best describes the income statement?
A) Assets − Liabilities = Stockholders' Equity.
B) Net income = Revenues + Expenses.
C) Net income = Revenues − Expenses.
D) Retained earnings = Net Income + Dividends.
Income Statement
An Income Statement is a financial report that shows a company's revenues, expenses, and profits over a specific period, providing insight into its financial performance.
Net Income
The amount of profit left after all operating expenses, taxes, and interest payments are deducted from total revenue.
Revenues
Revenues are the total income earned by a company from its normal business activities, before any expenses are deducted.
- Acquire knowledge on the utility of financial statements, including cash flow and income statements, in appraising the fiscal health of a business.
Verified Answer
JE
Joshuah EwingMay 16, 2024
Final Answer :
C
Explanation :
The income statement shows the revenues earned and expenses incurred during a specific period of time. The equation that best describes this relationship is Net income = Revenues − Expenses. This equation shows that the net income (or profit) is calculated by subtracting the expenses from the revenues.
Learning Objectives
- Acquire knowledge on the utility of financial statements, including cash flow and income statements, in appraising the fiscal health of a business.