ADMS 3585 Lecture Notes - Lecture 3: Gross Profit, Measurement Uncertainty, Cash Flow

• School: York University
• Department: Administrative Studies
• Course: ADMS 3585
• Professor: Alla Volodina

Document Summary

Income statement is the statement that measures the success of a company"s operation for a specific time period. It is a key statement: however, every company"s statement is not the same, due to the underlying business models and/or industry, and partly due how this information is communicated as well as strategies. Objective 1: understand how firms create value and manage performance. Business model: involves getting cash, investing it in resources and using these resources to generate profit. Underlying concept: representational faithfulness- requires the financial statements to reflect the economic reality of running a business, including how it creates and sustains value. Objective 2: understand how users use information about performance to make decisions. Underlying concept: a useful statement of income has both feedback and predictive value, which helps investors, creditors and other users to make decisions about stewardship and resources allocation. Decisions: evaluate past performance and profitability: by examining revenues, expenses, losses and gains.