SAP Business One Certification Practice Exam

Which financial report would be most informative when evaluating the performance of individual cost centers?

1. Balance sheet

2. Profit and loss statement

3. Cash flow statement

4. Expense report

The correct answer is: Profit and loss statement

The profit and loss statement is particularly useful for evaluating the performance of individual cost centers because it provides a clear overview of revenues, costs, and expenses over a certain period. This statement allows for an assessment of the profitability of each cost center by showing how much money is generated compared to how much is spent. By analyzing the profit and loss statement, managers can identify which cost centers are performing well and which may need improvement, as it breaks down the financial results into specific categories. In contrast, the balance sheet primarily focuses on the financial position of a company at a specific point in time, detailing assets, liabilities, and equity rather than performance over a period. The cash flow statement shows the flow of cash in and out of the business but does not provide detailed insights into profitability related to individual cost centers. The expense report highlights expenditures but lacks the comprehensive revenue and cost relationships presented in a profit and loss statement, making it less suitable for a performance evaluation.