DECA Sports and Entertainment Marketing Practice Exam

What does an Income Statement provide?

1. A breakdown of product costs

2. A summary of revenues and expenses over a period

3. A statement of equity for an organization

4. A forecast of future earnings

The correct answer is: A summary of revenues and expenses over a period

An Income Statement provides a summary of revenues and expenses over a specific period, typically reflecting a company's performance within that timeframe. This financial document shows how much money the business earned (revenues) and how much it spent (expenses), resulting in either a profit or a loss. The significance of this summary lies in its ability to give stakeholders insights into the company's operational efficiency and profitability. By analyzing the Income Statement, investors, management, and other interested parties can gauge the overall financial health of an organization and make informed decisions based on the business's performance during the reported period. Other choices, while related to financial reporting, do not accurately describe the primary function of an Income Statement. For instance, a breakdown of product costs pertains more directly to cost analysis, and a statement of equity provides information about ownership interest rather than operational performance. A forecast of future earnings, although valuable, is not a function of the Income Statement but rather a projection based on various analyses including past income statements and market trends.