Question 1. Your friend comments, 'I just ignore the income statement when I'm making an investment decision. All I care about is the cash, so that the company can pay me dividends. The balance sheet tells me about the cash the company's got; the cash flow statement tells me about its changes in cash. Who cares about the income statement? It's just a bunch of inaccurate stuff loaded with estimates.' Do you agree with your friend's remarks about the income statement and its lack of importance?
Explain why or why not.
Question 2. Why is an income statement divided into so many different categories? Couldn't all the revenues and all the expenses each be totaled and then subtracted from each other to determine net income? Wouldn't this make accounting easier to learn? Explain.