Income Statement

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來自 Indian School of Business 的課程

Accounting and Finance for IT professionals

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Indian School of Business

Accounting and Finance for IT professionals

77 個評分

課程 3（共 6 門，Specialization Business Technology Management）

This course presents an introduction to the basics of financial accounting and finance for IT professionals. The first part of the course will focus on understanding the most important financial statements, namely, the balance sheet, the income statement, and the statement of cash flows. We will then focus on how we can understand the financial health and performance of the company by examining a number of important financial ratios that are derived from the financial statements of the company. The second part of the course will focus on the basics of finance. This includes the concept of time value of money, discounting cash flows, and capital budgeting. The course will also introduce the idea of real options, how they affect a project’s NPV, and their impact of the decision to accept/reject a project. Lectures on concepts will be supplemented with numerical examples.

從本節課中

Basics of Financial Statements

This module provides a brief introduction to financial statements and various common filings. These are the most important sources for obtaining information regarding a company's performance. Most strategies are indeed based on financial statements. After completing this module you will be able to get the important details from the balance sheets.

Introduction and Courser Overview2:31

Business Organizations4:57

Role of Financial Manager4:20

Introduction to Accounting5:08

The Balance Sheet3:12

Liabilities4:45

Shareholders' Equity4:30

Income Statement4:20

Statement of Cash Flows4:02

Cash Flows from Operations9:19

Cash Flows from Investments and Financing6:20

與講師見面

Ramabhadran Thirumalai
Assistant Professor
Indian School of Business

[MUSIC]

We will continue to use Amazon's financial statements from its 2015

year-end annual report.

In this video, we will define the income statement.

We will also distinguish between expensing and capitalizing.

Finally, we will talk about the first item on the income statement, namely,

revenues or sales.

The income statement is also referred to as profit and loss statement.

It reports a company's operating results for

the period, which largely includes its revenues and costs.

Amazon's annual report refers to the income statement

as consolidated statements of operations.

The income statement is of interest to analysts, investors, and

potential investors, as it tells them how profitable a company is.

In a nutshell, a company's net income, which is also called profit or

loss, Is its revenues minus all expenses.

We will look in greater detail at what constitutes these revenues and expenses.

Before we start looking at the various items on the income statement,

we will discuss the difference between expensing and capitalizing.

Assets and expenses are two sides of the same coin.

Both require the use of a company's resources.

However, if the benefits of the use of these resources result in the same period

as the use itself, then the use is categorized as an expense.

The entire amount used appears on that period's income statement.

However, if the benefits of the use are expected to accrue in future time periods

when compared to when the resources are used, then the use is capitalized.

This means that the entire amount used is shown as an asset on the balance sheet.

Examples of such capitalized expenditures are plant, property, and

equipment, PP&E, purchased patents and trademarks.

The capitalized expenditures are eventually charged

as expenses to the income statement through two different processes.

One is amortization, two is impairment.

Amortization is the process of allocating an asset's value

to those future periods when its benefits are expected to be earned,

typically over the asset's useful life.

For example, if an asset's useful life is five years, then one-fifth

of the asset's value will be charged as an expense during each of those five years.

The most common example of amortization is depreciation,

which is terminology used for amortizing planned property and equipment.

In certain circumstances, market forces or

nature may destroy substantial parts of an asset's value.

In such a case, we write down the value of the asset to its current fair value,

that is, its market value, through a process of impairment.

The amount of impairment is charged as an expense

during the period when the value destruction occurs.

Note that amortization is a periodic charge that occurs every period

over the asset's life.

While impairment is a one-time event.

Moving on to the income statement, its first item is revenue or sales.

It is also called a top line as its first item on the income statement.

Revenues include only income from the company's primary lines of business or

operations.

It excludes income from other sources like investments.

These will be reported later in the income statement.

Looking at Amazon's income statement at the end of 2015, it had net product

sales of $76.27 billion and net server sales of $27.74 billion.

Net means that these revenues are net of any returns and

net of any discounts offered to customers.

Amazon's annual report states that net product sales

are those realized from selling its own inventory.

Net service sales are largely Amazon's share of revenue of items

sold by third-party sellers.

Taken together, Amazon's net sales revenues for

2015 was $107.01 billion.

Next time, we will start looking at the various expenses a company incurs

in generating these revenues.

[MUSIC]

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