Why would a company's employees be directly interested in the company's income statement?

• A. To assess job security
• B. To assess profitability, performance, and liquidity
• C. To determine the company's current stock price
• D. To evaluate marketing strategies

Answer: (B)

The main idea here is how employees use the income statement to judge how well the company is doing financially. The income statement shows revenues minus expenses, culminating in net income. That net income reveals profitability—are sales turning into actual profit after costs? It also reflects performance—how efficiently the company is using its resources and controlling costs over a period.

For employees, profitability and strong performance matter because they relate to job security and the possibility of bonuses, raises, or other rewards. If profits are decreasing, payroll budgets or hiring plans might tighten; if profits are strong, there’s a better chance of pay increases and continued employment. While liquidity is more directly a balance sheet or cash-flow concern, sustained profitability supports the company’s ability to meet short-term obligations and fund operations over time, which also protects employees’ financial security.

So the income statement is most informative for assessing profitability, performance, and the potential impact on the company’s ability to sustain operations and pay its people.