analyzing a company’s financial statements, calculating the price-earnings ratio, and reviewing notes to the financial statements on the income statement.

According to the textbook, the income statement measures the success of a company’s operations for a given period. The income statement is important to investors and creditors because it determines the profitability, investment value, and creditworthiness of a company. Specifically, the income statement helps investors and creditors predict the amounts, timing, and uncertainty of future cash. Income statement preparers can make such informed predictions by analyzing a company’s financial statements, calculating the price-earnings ratio, and reviewing notes to the financial statements on the income statement.