A buyer is considering purchasing an existing commercial building. What financial statement would be most critical to review to understand the property's operating income and expenses over a previous period?

Question: A buyer is considering purchasing an existing commercial building. What financial statement would be most critical to review to understand the property's operating income and expenses over a previous period?

Answer options: ✅ Income and expense statement (or operating statement)

• Balance sheet of the current owner
• Personal tax returns of the seller
• Cash flow statement for the buyer's own business

Correct answer: Income and expense statement (or operating statement)

Explanation: The income and expense statement, also known as the operating statement, provides a detailed breakdown of a property's revenues and operating costs over a specific period. This document is essential for a buyer to accurately project future profitability and assess the property's financial viability.