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Why a Statement of Comprehensive Income is Important

Updated: Sep 19, 2023

The statement of comprehensive income, also known as an income statement, shows a company's revenues and expenses over a specific period. But why is the statement of comprehensive income so important, and what can it tell us about a company?


Learn more by watching the video and reading the blog post below:



It shows the profitability of a company


One of the main reasons why the statement of comprehensive income is important is that it shows whether a company is generating a profit or a loss. This is crucial information, as a company needs to be profitable to sustain itself and grow. By looking at the company's revenues and expenses, a business student can see whether the company is on the right track or if it needs to make changes to improve its financial performance.


It helps to identify trends in a company's financial performance


In addition to showing the profitability of a company, the statement of comprehensive income can also help to identify trends in a company's financial performance. By looking at the statement of comprehensive income over time, you can see whether a company's revenues and expenses are increasing or decreasing. For example, if a company's revenues have consistently increased over the past several years, it might be a sign that the company is doing well. On the other hand, if a company's expenses have consistently increased while its revenues have remained stagnant, it might be a sign that the company needs to make changes to improve its financial performance.


It helps to inform business decisions


The statement of comprehensive income can provide valuable information that can be used to inform business decisions. For example, if a company is consistently generating a profit, it might be a good time to invest in new equipment or expand the business. On the other hand, if a company is consistently generating a loss, it might be necessary to make changes to improve the company's financial performance. By understanding the statement of comprehensive income, you can make informed decisions that can help to drive the success of a company.


Overall, the statement of comprehensive income is an important financial statement that provides valuable information about a company's financial performance. It's important to understand the statement of comprehensive income and how it can be used to inform business decisions.

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