Final answer:
Option D: All of these answer choices are correct. The income statement can be used to assess liquidity, solvency, and creditworthiness.
Step-by-step explanation:
Option D: All of these answer choices are correct.
The income statement is a financial statement that shows a company's revenues, expenses, and net income over a specific period of time. It provides information about a company's profitability and financial performance.
The income statement can be used to assess liquidity, which refers to a company's ability to meet its short-term obligations. For example, if a company's income statement shows high profits and positive cash flow, it indicates that the company has enough liquidity to cover its expenses and debts.
Additionally, the income statement can be used to assess solvency, which refers to a company's ability to meet its long-term obligations. If a company's income statement shows consistent profitability and a healthy level of net income, it indicates that the company is financially stable and has the capacity to pay off its long-term debts.
Furthermore, the income statement can be used to assess creditworthiness. Lenders and investors often review a company's income statement to evaluate its creditworthiness before extending loans or making investment decisions. A strong income statement with high profits and positive cash flow indicates that the company is creditworthy and has the ability to generate sufficient returns to repay its debts.