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Chapter 1. Working with Income Statements > Using the Income Statement

Using the Income Statement

The income statement is a powerful tool for decision making. It portrays the flow of money and the relationship of revenues to expenses over a period of time. It tells us how much money was made in a year. The terms profit, net income, and earnings are commonly used to state the bottom line.

The income statement provides a starting point in the analysis of a business. The popular press frequently reports earnings and nothing more: “Today, U.S. Widgets reported quarterly income of $240 million.” This is positive, but there is more to the story.


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