Which financial document reflects the relationship between net income and owner's equity?

The statement of owner's equity is the financial document that specifically highlights the relationship between net income and owner's equity. This statement outlines how the equity of owners (or shareholders) changes over a specific period, taking into account net income earned during that time, as well as any dividends distributed, additional investments made by owners, and any other adjustments.

By detailing these components, the statement of owner's equity provides insights into how net income contributes to the overall equity in the business. It begins with the opening balance of equity, adds net income from the income statement, subtracts any dividends, and concludes with the ending balance of owner's equity. This demonstrates how profits generated by the company affect the equity stake of the owners.

The other financial documents serve different purposes: the income statement focuses on revenues and expenses to determine net income; the statement of cash flows shows cash inflows and outflows related to operating, investing, and financing activities; while the balance sheet provides a snapshot of the company's assets, liabilities, and equity at a specific point in time. However, only the statement of owner's equity specifically connects net income to changes in equity, making it the most relevant document for understanding this relationship.