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1.
Total revenue from product sales minus the cost of producing those products yields _______.
Gross profit on sales. This is the formula for gross profit on sales.
2.
If a client repays a debt early, that payment is called ______.
Extraordinary income. It is extraordinary because it is an unusual occurrence.
3.
The formula for net earnings includes interest expense. Interest expense is _______.
The amount of interest the company pays to its creditors. This figure includes all creditors.
4.
If a company has decided not to pay dividends to its stockholders this year, how will its retained earnings relate to its net earnings?
They will be the same. Retained earnings are net earnings minus dividends. If there are no dividends, then retained earnings will not have changed from net earnings.
5.
SONAR identifies the earnings on a balance sheet.
True. The acronym includes the first letters of the earnings components.
6.
What must be subtracted from sales to arrive at gross profits on sales?
Cost of goods sold. Cost of goods sold is the price the company paid to produce the goods. When subtracted from sales, gross profits on sales is the result.
7.
Operating income includes any income that comes from outside sources.
False. Outside sources are not part of the operating income equation.