Which financial document is primarily used to monitor a company's profitability?

The income statement is the financial document primarily used to monitor a company's profitability because it summarizes revenues, costs, and expenses over a specific period, typically a quarter or a year. This statement provides a detailed account of how much money the company has earned (revenues) and what expenses it has incurred, ultimately showing the net income or loss for that period. This net income is a direct measure of a company's profitability, illustrating whether the business is making a profit or incurring a loss.

In contrast, the cash flow statement focuses on the actual cash generated or used during a period, detailing cash inflows and outflows from operating, investing, and financing activities. While cash is critical for a business's operation, this statement does not directly measure profitability.

The balance sheet provides a snapshot of the company's financial position at a specific point in time, detailing assets, liabilities, and equity. Although it provides insights into the company's financial health, it does not reflect the company's profitability over a period.

The statement of changes in equity summarizes the movement in equity from various sources, such as retained earnings and additional capital contributions, but it does not directly address the profitability of the business.

Thus, the income statement is specifically designed to track and assess a company's ability to generate