Question:medium
What does the Profit and Loss Account help stakeholders assess?
What does the Profit and Loss Account help stakeholders assess?
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The Profit and Loss Account reveals the company's profitability over a period.
Updated On: Jan 14, 2026
- The company's liquidity
- The company's solvency
- The company's profitability
- The company's market share
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The Correct Option is C
Solution and Explanation
The Income Statement (also known as the Profit and Loss Account) details the revenues, costs, and expenses over a defined period.
This statement aids stakeholders in evaluating the company's profitability by presenting:
Total revenue
Total expenses
Net income or loss for the period
A clear understanding of profitability enables investors, creditors, and management to gauge the company's financial performance.
Other Options Explained:
(A) Liquidity: Evaluated using the Balance Sheet or Cash Flow Statement.
(B) Solvency: Refers to the long-term capacity to fulfill debt obligations, assessed through Balance Sheet ratios.
(D) Market Share: Derived from market data, not from financial statements.
Therefore, option (C) is accurate.
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