Comparing the income statement with the balance sheet
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Some people feel that the income statement is more important than the balance sheet. Do you agree? Why or why not? What are some of the limitations of the balance sheet in evaluating a company's growth potential? What are some of the limitations of the income statement?
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Solution Summary
The following solution explains the importance of the income statement as compared to the balance sheet. It gives the definition and purpose of the income statement and the balance sheet as well as the limitations of each in evaluating a company's growth potential.
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The income statement is more important than the balance sheet in order to effectively evaluate a company's potential growth. The income statement represents a company's financial activity within a specified period of time, while a balance sheet represents a brief snapshot of a company's financial activity. An income statement is a company's financial statement that indicates how the revenue becomes the net income. (Revenue is money ...
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