Analysis Intermediate: Understanding the Income Statement

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1.
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?
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$900,000. Retained earnings are net earnings minus dividends.
2.
Total revenue from product sales minus the cost of producing those products yields _______.
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Gross profit on sales. This is the formula for gross profit on sales.
3.
A companys operating income is gross profit minus _______
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Depreciation and general operating expenses. Once sales, depreciation, and expenses are accounted for, one can see the success of the companys operations.
4.
SONAR identifies the earnings on a balance sheet.
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True. The acronym includes the first letters of the earnings components.
5.
The formula for net earnings includes interest expense. Interest expense is _______.
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The amount of interest the company pays to its creditors. This figure includes all creditors.
6.
Taxes are among the expenditures on an income statement.
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True. Taxes are subtracted from income.
7.
"Other income" includes a factor that is often not named in a balance sheet. What is the name for this factor?
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Extraordinary income. Both "other income" and "extraordinary income" are income derived from outside the normal scope of a companys operations.