Income statement vs balance sheet

What is an income statement?

A financial report showing a company's revenues and expenses over a specific period.

What does a balance sheet show?

A snapshot of a company's assets, liabilities, and equity at a specific point in time.

True or false: Income statements reflect financial position.

False, because they show performance over time, not position.

Difference between revenues and expenses?

Revenues are earnings from sales, while expenses are costs incurred in generating revenues.

What is net income?

The profit remaining after all expenses are deducted from total revenues.

Fill in the blank: The balance sheet formula is ___ = Assets - Liabilities.

Equity

True or false: Balance sheets cover a period.

False, because they represent a specific date.

What are current assets?

Assets expected to be converted into cash within one year, e.g., cash, inventory.

What are long-term liabilities?

Obligations due in more than one year, like loans and bonds payable.

Question: How often are income statements produced?

Typically quarterly or annually, depending on reporting requirements.

True or false: Equity includes retained earnings.

True, because retained earnings are part of shareholders' equity.

Difference between gross profit and net income?

Gross profit = Revenues - Cost of Goods Sold; net income = Gross profit - other expenses.

What is the purpose of an income statement?

To assess profitability and performance over a defined period.

Fill in the blank: The balance sheet shows ___ of the company.

financial position

Question: What reflects financial health more, income statement or balance sheet?

Balance sheet reflects overall financial health at a point in time.

Which report is used for investment decisions?

Both reports are important; income statements for profitability and balance sheets for stability.

True or false: A company can be profitable and still have negative equity.

True, due to high liabilities or accumulated losses.

What is EBITDA?

Earnings Before Interest, Taxes, Depreciation, and Amortization; a measure of operational performance.