Analysis Intermediate: Understanding the Income Statement

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Taxes are among the expenditures on an income statement.
Choose wisely. There is only one correct answer.
True. Taxes are subtracted from income.
2.
Why do stockholders take an interest in a companys net earnings?
Choose wisely. There is only one correct answer.
Net earnings determine how much is available to be paid as dividends. Of course, the board of directors must first declare dividends payable.
3.
Total revenue from product sales minus the cost of producing those products yields _______.
Choose wisely. There is only one correct answer.
Gross profit on sales. This is the formula for gross profit on sales.
4.
SONAR identifies _______.
Choose wisely. There is only one correct answer.
Earnings. All earnings, when placed vertically and worded in a special way, will spell the acronym SONAR.
5.
Imagine that last year, the new company Vitamin$.com paid $100,000 in dividends to its shareholders. Its net earnings were $1,000,000. What are the companys retained earnings?
Choose wisely. There is only one correct answer.
$900,000. Retained earnings are net earnings minus dividends.
6.
If a client repays a debt early, that payment is called ______.
Choose wisely. There is only one correct answer.
Extraordinary income. It is extraordinary because it is an unusual occurrence.
7.
Operating income measures how profitable a companys operations are.
Choose wisely. There is only one correct answer.
True. This ultimately assesses the competence of the company in running itself.