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Stocks 301: The Income Statement

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1.
A company's sales, minus its cost of sales, is known as _______.
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Gross profit. Gross profit is defined as sales (or revenue) minus cost of sales.
2.
Under accrual accounting, a company records an expense when _______.
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The company has incurred it. A company records an expense when it is incurred. Under accrual accounting, expenses are not necessarily incurred when cash is spent.
3.
A company's cost of sales represents all of the expenses directly incurred in _______.
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Creating goods or services. Cost of sales is also known as cost of goods sold or cost of services.
4.
A company's revenue may also be called by what other word?
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Sales. For accounting purposes, it usually is called revenue.
5.
Which of the following expenses is subtracted from sales when calculating operating profit?
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SGA. Operating profit is sometimes called EBIT, or earnings before interest and taxes. Cost of goods sold and SGA are two of the main expenses subtracted from revenue in calculating operating profit.