Financial Data
Assume that a financial investor is analyzing the latest income statement prepared by a company in
hopes of deciding whether to buy its capital stock or, possibly, loan money to the company. Or, perhaps, a current
employee must decide whether to stay with the company or take a job offer from another organization. Both of
these individuals want to assess the company’s financial health and future prospects. Certainly, all the available
financial statements need to be studied but, initially, this person is looking at the income statement. What types of
financial data will be available on a typical income statement such as might be produced by a business like IBM,
Apple, Papa John’s, or Pizza Hut?
Answer: The main content of an income statement is rather straightforward: a listing of all revenues earned and
expenses incurred by the reporting organization during the period specified.
“What Should Decision-makers Know So That Good Decisions Can Be Made about an Organization?”, revenue
figures disclose increases in net assets (assets minus liabilities) that were created by the sale of goods or services
resulting from the primary operations of the organization. For IBM, revenues are derived from the sale and
servicing of computers and the like (a total of nearly $104 billion in 2008) while, for Papa John’s International,
the reported revenue figure (a bit over $1.1 billion) measures the sale of pizzas and related items.
