Certified Meeting Professional (CMP) Practice Exam

An income statement primarily focuses on what type of financial activity?

1. Assets and liabilities

2. Revenues and expenses

3. Profit margins only

4. Cash flow management

The correct answer is: Revenues and expenses

The income statement is a critical financial document that provides a summary of a company's revenues and expenses over a specific period, typically a quarter or a year. It shows how much money the company earned (revenues) and how much it spent (expenses), ultimately reflecting the company's profitability during that time frame. Understanding this statement is essential for stakeholders to evaluate the operational efficiency and financial health of the organization. While assets and liabilities are important components of a balance sheet, and cash flow management plays a significant role in overall financial stability, these elements are not the primary focus of the income statement. Profit margins are a result of the relationship between revenues and expenses but do not form the core content of the income statement. Therefore, the focus on revenues and expenses is what makes the correct answer accurate and highlights the purpose of the income statement in financial reporting.