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Hospitality Industry Managerial Accounting 8th Edition

Hospitality Industry Managerial Accounting (8th Edition)

Book Edition8th Edition
Author(s)Schmidgall
ISBN9780866124973
PublisherEduc. Inst. Of The American Hotel & Motel Assoc.
SubjectAccounting

Chapter 3, End of Chapter, Review Questions, Exercise 2

Page 124

Here is a tip:

Net income is computed as the difference between total revenue and total expenses.

Explanation

  • The income statement is a financial statement that provides information about the financial position of a company and its capabilities. It can assist lenders in deciding if they want to invest money in the company. 
  • The lender decides a company's creditworthiness after analyzing the company's future earning capacity. 
  • The ability of a company to fulfill its future obligations can be determined by analyzing its income statement.

Verified Answer

Creditors analyze the income statement to decide whether to lend money to a company or not.

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