What are merit and demerit of incomestatement?

Answer 1

The merit of an income statement lies in its ability to provide a clear overview of a company's financial performance over a specific period, allowing stakeholders to assess profitability and operational efficiency. Additionally, it aids in decision-making for investors and management by highlighting revenue sources and expense management. However, a demerit is that it does not capture non-financial factors or future potential, and it may be influenced by accounting practices, which can obscure the true financial health of the business. Moreover, it typically does not reflect cash flow, which is crucial for understanding liquidity.