From the course: Corporate Financial Statement Analysis

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Break down the income statement by revenues and costs

Break down the income statement by revenues and costs

From the course: Corporate Financial Statement Analysis

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Break down the income statement by revenues and costs

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The second primary financial statement is the income statement and can be summarized as revenues minus expenses equal net income. Now we use the terms revenue 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. Walmart's inventory, we pay Walmart to buy those things. 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 movies. 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, and hopefully the assets generated are more than the assets consumed.…

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