At this point we can establish a very basic equality, that is that Investments must equal financing. This is known as the balance sheet equation. The second principal financial statement is the income statement . It presents the results of operating the company over a period of time. It details revenues, expenses, and net income.
Net income is equal to revenue minus expenses.
Revenues are basically sales. They are increases in shareholders' investment due to operating the company. Expenses are basically the consumption of the company's assets to support operations. They are decreases in shareholders' investment due to operating the company. Generating profits is generally a primary goal of business.