What does the income statement indicate about a business?

The income statement provides a detailed overview of a business's financial performance over a specific period, typically summarizing the revenue earned, the expenses incurred, and the net income or loss resulting from those activities. This statement is crucial for assessing how effectively a business generates profit through its operational activities. By analyzing the income statement, stakeholders can determine the profitability of the business, understand trends in expenses, and evaluate operational efficiency. Understanding the income statement is essential for making informed financial decisions and measuring overall financial health over the specified timeframe.

In contrast, the other options focus on different financial aspects: total liabilities describe a snapshot of what a business owes at a specific point in time; the cash position refers to the liquidity of the business over time, which is typically represented in a cash flow statement; and the owner's contributions pertain to equity financing but do not provide information about operational performance. Therefore, the focus of the income statement distinctly highlights income, expenses, and net results over a defined period, which is accurately reflected in the correct choice.