4 Revenue and Expenses
Income Statement Fundamentals
Jacqueline Gagnon
A business model describes how a company creates value in the marketplace. Some companies manufactureManufacturer:
A company with a business model of building inventory and selling it. For example, Yamaha Corporation manufactures musical instruments, audio equipment, motorcycles, and snowmobiles. products, some buy and re-sell products, and others provide exclusively service. Of course, companies may have a blended business model. For example, lululemon athletica both manufactures athletic wear and sells direct to customer (retail).
A business model is how a company creates value. And the income statement helps users understand how a company is performing on its business model. What information might users want to make this evaluation? Can you think of any?
Examples of Canadian Business Models
- Federated Co-op Limited (FCL)
- “FCL’s business is largely business-to-business (B2B). We focus on serving our independent retail co-operative members, but also work with other businesses and individuals. Our core business includes wholesaling, manufacturing, marketing, and administration in four areas: agriculture, energy, food, and home and building solutions.” (https://www.fcl.crs/our-business/overview)
- Shopify Inc
- “Shopify is a leading provider of essential internet infrastructure for commerce, offering trusted tools to start, grow, market, and manage a retail business of any size. Shopify makes commerce better for everyone with a platform and services that are engineered for simplicity and reliability, while delivering a better shopping experience for consumers everywhere. In an era where social media, cloud computing, mobile devices, augmented reality, and data analytics are creating new possibilities for commerce, Shopify provides differentiated value by offering merchants: A multi-channel front end, a single integrated back end, a data advantage, brand ownership, mobile, global, and infrastructure. This combination of ease of use with enterprise-level functionality allows merchants to start with a Shopify store and grow with our platform to almost any size. Using Shopify, merchants may never need to re-platform. Our Shopify Plus subscription plan was created to accommodate larger merchants, with additional functionality, scalability, and support requirements. The Shopify Plus plan also appeals to larger merchants not already on Shopify who want to migrate from their expensive and complex legacy solutions and get more functionality.” (Shopify Annual Report, 2023)