Florida General Contractor Practice Exam

What is another term for a construction company's income statement?

1. Balance sheet

2. Profit and loss statement

3. Cash flow statement

4. Operating statement

The correct answer is: Profit and loss statement

A construction company's income statement is commonly referred to as a profit and loss statement. This document plays a crucial role in providing an overview of the company's financial performance over a specific period, detailing revenues, costs, and expenses associated with the business activities. The term "profit and loss statement" indicates the company's ability to generate profit by subtracting total expenses from total income. This statement is vital for stakeholders, including management, investors, and creditors, as it offers insights into the company's profitability and operational efficiency. It typically highlights gross profit, operating income, and net income, allowing for a comprehensive understanding of financial health in construction operations. Other financial statements serve different functions. For instance, a balance sheet provides a snapshot of a company's assets, liabilities, and equity at a specific point in time, focusing on financial position rather than performance. Similarly, a cash flow statement tracks the movement of cash in and out of the business, offering insights into liquidity and cash management but not profitability. An operating statement may be used interchangeably in certain contexts, but "profit and loss statement" is a more widely recognized term specifically linked to income reporting.