Certified Supply Chain Professional (CSCP) Practice Exam

What do managers and investors analyze over time using the income statement?

1. If the company has reduced expenses

2. If the company has made or lost money

3. The total assets of the company

4. The growth rate of the company's output

The correct answer is: If the company has made or lost money

Managers and investors use the income statement primarily to assess the company's profitability over a specific period, determining whether the company has made or lost money. The income statement provides detailed insights into revenues generated and expenses incurred during that time frame. By comparing these figures, management and investors can evaluate the overall financial performance of the company. When analyzing the income statement, stakeholders look at key components such as revenues, cost of goods sold, gross profit, operating expenses, and net income. This assessment helps them understand the company's operational efficiency, market competitiveness, and financial health. Making informed investment or operational decisions requires a clear grasp of whether a company is generating profits or operating at a loss, which is explicitly outlined in the income statement. In contrast, while interpreting reductions in expenses, assessing total assets, or examining output growth can be important, those analyses are typically derived from other financial statements or metrics rather than the income statement directly. Thus, the focus on the income statement centers on overall profitability, making the evaluation of whether the company has made or lost money the primary objective of that analysis.