What does the income statement report?

The income statement is designed to provide a detailed overview of a company’s financial performance over a specified period of time, typically a quarter or a year. It summarizes the revenues generated from operations and the expenses incurred during that same period. The primary purpose of the income statement is to showcase how much profit or loss a company has made, essentially reflecting its operational effectiveness and profitability.

By listing revenues and expenses, the income statement helps stakeholders understand how well the company is managing its resources to generate profits. This statement is crucial for investors and analysts as it allows them to assess the company's operational efficiency, make comparisons with previous periods, and evaluate potential future performance based on past behavior.

In contrast, other options address different financial statements or concepts. One option pertains to the balance sheet, which focuses on assets and liabilities at a particular point in time, while another mentions cash flow, which is reported in the cash flow statement rather than the income statement. Lastly, equity is detailed in the statement of changes in equity and the balance sheet, not in the income statement. Thus, the focus on revenues and expenses in the income statement makes the second option the accurate representation of what is reported in this particular financial statement.