Return on Investment: Understanding Your Profit Margin

The bottom line on the income statement is net income, which is the amount of profit or loss a business has made over a specific period of time. In our lemonade stand example, Ackman calculates that the business will have a net income of $170 ($800 in revenue - $530 in expenses).

To start a business, you'll need to choose a legal structure. One common option is incorporation. This means that you create a separate legal entity for your business. As Bill Ackman explains in our lemonade stand example, you'll need to file paperwork with your state and come up with a name for ...

An income statement is a financial statement that shows a company's revenue, expenses, and net income over a specific period of time. It can help you understand how much money your business is making and where that money is going. In our lemonade stand example, Ackman explains that the income sta...

Fixed assets are long-term assets that a business uses to generate revenue, such as buildings or equipment. Inventory refers to the products a business has on hand to sell to customers. In our lemonade stand example, Ackman explains that the business will need to buy a lemonade stand for $300 (a ...

A balance sheet is a financial statement that shows a company's assets, liabilities, and equity at a specific point in time. It's important to understand the balance sheet to see how your business is doing financially. In our lemonade stand example, Ackman explains that the balance sheet shows th...

Once you've incorporated your business, you'll need to raise capital to get started. This can be done by selling stock or borrowing money. As Ackman explains, selling stock means that you're selling ownership in your company. In our lemonade stand example, Ackman sold 500 shares of stock for $1 e...