After this video, learners will be able to describe what is on the income statement and that net income equals revenues minus expenses.
- The second primary financial statement … is the income statement. … The income statement tells us revenues minus expenses, … and that equals net income. … We use the term revenues and expenses all the time, … so let's make sure we know what these words mean. … In an accounting context, … revenue means the amount of assets … generated in doing business. … And different companies generate assets in different ways. … Walmart, for example generates assets … by putting things on shelves that you and I buy. … We pay Walmart more for the inventory … than they themselves paid for it. … That's how Walmart creates assets. … Microsoft creates assets by creating software and hardware … that you and I then buy … and we pay Microsoft for those things. … Disney has consumer products. … They have cruises. … They have theme parks. … We pay to use those things or to buy those products, … and that's how Disney generates assets. … Revenue is the amount of assets generated in doing business. … Hopefully, the assets generated …
- Describe how decision-makers use accounting in a business.
- Recognize limitations in financial statement analysis.
- Relate the purpose of financial ratio analysis.
- Determine the primary reason for managing cash through the operating cycle.
- Define the role of efficiency in creating budgets.
- Identify differences between federal income tax and other taxes, such as state sales tax.