Income Statement and Balance Sheet

What is the formula to calculate Cost of Goods Sold?

• Beginning Inventory - Purchases + Ending Inventory

• Beginning Inventory x Purchases - Ending Inventory

• Beginning Inventory + Purchases - Ending Inventory

• Beginning Inventory / Purchases + Ending Inventory

Name three examples of operating expenses.

• Purchasing new equipment

• Marketing and advertising expenses

• Employee training and development costs

• 1. Rent or lease payments for office space or equipment 2. Salaries and wages for employees 3. Utility bills such as electricity, water, and internet

List three examples of current assets.

• Property, equipment, patents

• Cash, accounts receivable, inventory

What are long-term liabilities and how are they different from current liabilities?

• Long-term liabilities are obligations due beyond one year, while current liabilities are due within one year.

• Long-term liabilities are related to assets, while current liabilities are related to liabilities.

• Long-term liabilities are not financial obligations, while current liabilities are financial obligations.

• Long-term liabilities are obligations due within one year, while current liabilities are due beyond one year.

How do you calculate net income?

• Gross Profit + Total expenses = Net income

• Gross Profit x Total expenses = Net income

• Total revenue / Total expenses = Net income

• Gross Profit - Total expenses = Net income

Explain the significance of Cost of Goods Sold in the income statement.

• Cost of Goods Sold is used to calculate net profit

• Cost of Goods Sold represents the total expenses of a company

• The significance of Cost of Goods Sold in the income statement is that it shows the direct costs associated with the production of goods or services, and is essential for calculating the gross profit of a company.

• Cost of Goods Sold is only relevant for service-based companies

What are the typical operating expenses for a retail business?

• Rent, utilities, payroll, inventory, marketing, insurance, and maintenance costs

• Legal fees, travel expenses, and equipment purchases

Give an example of a long-term liability for a company.

• Short-term investments

• Long-term loans or bonds payable

• Inventory

• Accounts receivable

Why is it important for a company to have a healthy current asset ratio?

• It is important for a company to have a healthy current asset ratio because it shows the company's ability to meet its short-term financial obligations.

• It is important for a company to have a healthy current asset ratio because it reflects the company's marketing strategies.

• It is important for a company to have a healthy current asset ratio because it shows the company's ability to attract new investors.

• It is important for a company to have a healthy current asset ratio because it indicates the company's long-term financial stability.

How does net income affect the balance sheet?

• Net income decreases liabilities on the balance sheet.

• Net income decreases assets on the balance sheet.

• Net income has no effect on the balance sheet.

• Net income increases retained earnings on the balance sheet.