Income Statements

Which of the following phrases effectively describes a business’s income statement:

• Budget estimate

• Financial picture

• Cash flow report

• Income preview

Another term for an income statement is a(n)

• interest statement.

• operating statement.

• purchasing statement.

• expense statement.

Which of the following is the basic calculation used to analyze an income statement:

• Income minus expenses

• Sales plus operating costs

• Revenue plus sales

• Assets minus liabilities

Interest a business earns from its bank accounts is included in which category of the income statement?

• Revenue

• Assets

• Net income

• Gross sales

A business that loses items to theft includes those items in which category of the income statement?

• Capital goods

• Long-term liability

• Cost of goods sold/Cost of sales

• Operating expenses

What category of an income statement indicates total profit?

• Gross profit

• Bottom line

• Net profit

• Cash flow

Which of the following is an example of an expense that a business would include in the operating-expenses category of an income statement:

• Customer returns

• Cost of raw materials

• Insurance payments

• Shipping charges

The “bottom line” in a business’s income statement indicates

• gross revenue.

• net income.

• total costs.

• net worth.

One of the reasons why an income statement should be as accurate as possible is that businesses use it to develop additional

• operating policies.

• marketing activities.

• financial documents.

• research reports.

What does an accurate income statement often help a business identify?

• Potential sales

• Excessive income

• Trouble spots

• Problem vendors