What is a profit and loss statement?

A profit and loss statement, also known as an income statement, is a financial report that provides a summary of a company's revenues, costs, and expenses over a specific period. This statement is crucial for understanding the profitability of a business, as it highlights how much money the company earned (revenues) versus how much it spent (costs and expenses). By evaluating this report, stakeholders can assess whether the business is operating at a profit or a loss during the designated timeframe. It helps in making informed decisions regarding budgeting, financial planning, and assessing overall business performance.

The other options focus on different aspects of financial documentation. For instance, detailing customer payments relates to accounts receivable rather than a broader overview of profitability. Listing all assets and liabilities pertains to a balance sheet, which is designed to give a snapshot of financial position at a point in time. An overview of stock levels and inventory is typically documented in inventory reports, helping businesses manage their supplies and stock effectively. Each of these serves distinct purposes, while the profit and loss statement specifically addresses the income and expenses fundamental to assessing a company's financial performance.