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Unformatted text preview: has a very precise meaning, and you should accustom
yourself to the correct usage. It has already been pointed out that revenues are enhancements resulting
from providing goods and services to customers. Conversely, expenses can generally be regarded as
costs of doing business. This gives rise to another “accounting equation”:
Revenues - Expenses = Income Please click the advert You’re full of energy
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just what we are looking for. © UBS 2010. All rights reserved. Revenue is the “top line” amount corresponding to the total benefits generated from business activity.
Income is the “bottom line” amount that results after deducting the expenses from revenue. In some
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19 Basics of Accounting & Information Processing The Core Financial Statements 5. The Core Financial Statements
Your future will undoubtedly be marked by numerous decisions about investing money in the capital
stock of some corporation. Another option that will present itself is to lend money to a company,
either directly, or by buying that company’s debt instruments known as “bonds.” Stocks and bonds are
two of the most prevalent financial instruments of the modern global economy. The financial press
and television devote seemingly endless coverage to headline events pertaining to large public
corporations. Public companies are those with securities that are readily available for purchase/sale
through organized stock markets. Many more companies are private, meaning their stock and debt is
in the hands of a narrow group of investors and banks. If you are contemplating an investment in a
public or private entity, there is certain information you will logically seek to guide your decision
process. What types of information will you desire? What do you want to know about the companies
in which you are considering an investment? If you were to prepare a list of questions for the
company’s management, what subjects would be included? Whether this challenge is posed to a
sophisticated investor or to a new business student, the listing almost always includes the same basic
What are the corporate assets? Where does the company operate? What are the key products? How
much income is being generated? Does the company pay dividends? What is the corporate policy on
ethics and environmental responsibility?
Many such topics are noted within the illustrated “thought cloud.” Some of these topics are financial
in nature (noted in blue). Other topics are of m...
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- Summer '13