What is a financial statement?

A financial statement is a comprehensive document that provides an overview of an individual's or a company's financial status. This includes a listing of assets, liabilities, and net worth, which allows stakeholders to assess financial health and stability. Assets are resources owned that hold value, liabilities are obligations or debts owed, and net worth is the difference between the two, indicating the overall financial position.

The inclusion of these elements in a financial statement means it serves as a crucial tool for financial analysis, planning, and decision-making. This clarity helps investors, creditors, and management understand the company’s fiscal position and performance over time, facilitating informed strategic decisions.

Other options focus on narrower aspects of financial management. For example, calculating taxes relates specifically to tax obligations rather than a broader picture of financial health, while records of sales transactions focus solely on revenue generation. An investment income report highlights returns from investments, not the overall financial position of assets and liabilities. Therefore, the correct answer encompasses the broader definition and function of a financial statement.