Oregon Construction Contractors (CCB) Practice Test

What does an income statement summarize for a company?

1. Assets and liabilities.

2. Revenue and expenses.

3. Workforce expenses only.

4. Inventory levels.

The correct answer is: Revenue and expenses.

The income statement summarizes a company's revenue and expenses over a specific period, typically covering a quarter or a year. This financial document is essential for assessing the profitability of the business, as it highlights how much money the company earned (revenue) and how much it spent (expenses) during that time frame. By examining the entries on the income statement, stakeholders can determine the net income or loss, which is calculated by subtracting total expenses from total revenue. This insight into the company’s financial performance is crucial for investors, management, and others who wish to understand how well the business is operating and where its financial strengths and weaknesses lie. The other options focus on aspects that are not captured in the income statement; for example, assets and liabilities relate to the balance sheet, workforce expenses represent just a part of the overall expenses, and inventory levels pertain to inventory management rather than financial performance over time.