How do financial statements inform about a business's performance?

Financial statements are essential tools that provide insights into a business's performance by presenting a comprehensive view of its financial activities and status. The accurate choice reflects that financial statements report activities over a specific timeframe, such as an income statement or cash flow statement, which detail revenues, expenses, and cash flows during a period, as well as a snapshot of a company's financial position at a specific point in time, exemplified by the balance sheet.

This dual focus allows stakeholders—such as management, investors, and creditors—to analyze trends, assess operational efficiency, and evaluate the company's overall financial health. By showing performance over time, these statements help in making informed decisions about the future.

The other options do not encapsulate the full scope of what financial statements achieve. For instance, reporting only the current balance overlooks crucial information about financial performance over time. Highlighting both current and accruing revenues without considering expenses does not provide a complete picture of profitability, and excluding expenses entirely undermines the purpose of assessing financial health by obscuring true net earnings. Thus, the correct response underscores the comprehensive nature of financial reporting.