Okay so we can now compare the companys year over year performance We can look

Okay so we can now compare the companys year over

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of the pieces of information across the year. Okay, so we can now compare the company’s year over year performance. We can look at whether we had the increasing net income or decreasing net income over the years. We can do all this by looking at the income statement. Here we have the basic information we need to look at. Revenues. We know Starbucks sells coffee, and so the company owns so many stores across the world. What's the revenue generated from those stores? Also, the company has some licensed stores, here's the information. It might be selling its beans online. This is the revenue information. We also have the expenses , which are like operating expenses, depreciation, or administrative, restructuring different kinds of expenses. Therefore, we use revenue minus all of the expenses. What are we going to get as the net earnings, or net income? Here it is presented as a statement of earnings. It's the same as income statement. So that's the information we can find from the income statement. Revenues, that's the inflow of net assets generated by selling the products or providing the services. Starbucks of course sells coffee, so that's sales revenue. It could be service revenue. Think about a car wash company. It provides the service of washing the car. So, this will be service revenue expenses. Okay, that's the outflow of the net asset. We are spending money to purchase stuff and that type of purchasing is inventory. So here are some typical examples. Salary expenses , we are paying salaries to our employees. Other expenses include the use of water, electricity, and internet. These are utility expenses . And the one that is most important expense, that's cost of goods sold . We're going to cover it in depth in a later chapter. But what is the basis of cost of goods sold? It is the cost you purchased the inventory for, or if you are a manufacturer, that's a cost. You made these products. For example, if you sell the coffee machine, and you purchase a new coffee machine from somebody else, then you know how much it will cost. When you sell it, it becomes your cost of goods sold! So those are the different types of expenses. Then we have other revenues and
expenses. We can refer to it as gains or losses. That's Gains or Losses are from non- operating activities. What does that mean? That means it's not from your major business or main line. Let’s use Starbucks again. They just sell coffee, right? Right, but if Starbucks sells a piece of the land, that belongs in non-operating activity. This is because Starbucks, the main thing they are selling is coffee, it's not a real-estate company selling their land and their building for regular profit. So, that's how we differentiate operating vs. non-operating activities. Operating costs is the major business or main line of business that the company's running. Other examples of non- operating (not major business line or main line business) include interest revenue, gain on sale of the building, selling off an old coffee machine or glasses that it no longer uses. So then, let's get into statement of stockholder's equity . It tells us the changes of the equity over the time. Herein we have two types of equities. We have

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