What is the primary purpose of an income statement?

The primary purpose of an income statement is to demonstrate profitability over a specific period of time. This financial statement provides a detailed account of a company's revenues, costs, and expenses, ultimately showing how much profit or loss was generated during that timeframe. By analyzing the income statement, stakeholders such as investors, management, and creditors can assess the company's operational efficiency and overall financial health.

This focus on profitability helps organizations make informed decisions regarding budgeting, forecasting, and strategic planning, as it reflects how well the company is generating income relative to its expenses. Therefore, emphasizing profitability as the main goal of the income statement highlights its role in guiding financial and operational strategies within a business.