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WorksheetsChapter 21 - Income Statement IGCSE Exam Questions
Total questions: 20
Worksheet time: 10mins
What does an income statement show? (1 mark)
A business's financial position at a specific point in time
The inflows and outflows of cash over a period
The revenue, costs, and profit of a business over a period
The value of assets and liabilities
How is Gross Profit calculated? (1 mark)
Revenue – Expenses
Revenue – Cost of Sales
Revenue – Total Costs
Revenue – Retained Profit
Which of the following is an example of a business expense? (1 mark)
Raw materials used in production
Wages paid to office staff
Sales revenue earned from customers
Loans received from the bank
If a business has revenue of $50,000 and a cost of sales of $20,000, what is its gross profit? (1 mark)
$70,000
$30,000
$20,000
$10,000
What does the term "retained profit" mean? (1 mark)
The total profit before expenses are deducted
The profit left after dividends are paid to shareholders
The revenue earned from sales
The money borrowed from banks
A business has revenue of $80,000, cost of sales of $30,000, and expenses of $25,000. What is its net profit? (1 mark)
$80,000
$55,000
$25,000
$50,000
What is the key difference between profit and cash? (1 mark)
Profit includes only cash transactions, while cash includes all revenues and expenses
Profit represents total earnings, while cash refers to the actual money available
Profit is recorded on a cash flow statement, while cash is recorded in the income statement
Profit is the same as cash in all businesses
Who would use an income statement to decide whether to invest in a company? (1 mark)
Employees
Suppliers
Shareholders
Customers
Why might lenders be interested in a company's income statement? (1 mark)
To check if the company is making enough profit to repay loans
To determine the value of the company's assets
To find out how much stock the business holds
To compare its performance with other businesses
How can a business increase its retained profit? (1 mark)
Increase expenses
Reduce revenue
Increase total costs
Reduce dividends paid to shareholders
What is included in the cost of sales? (1 mark)
Advertising expenses
Rent of office space
Raw materials used in production
Interest on bank loans
If a business has a gross profit of $40,000 and total expenses of $15,000, what is its net profit? (1 mark)
$55,000
$40,000
$25,000
$15,000
What is the purpose of an income statement? (1 mark)
To show the cash balance of a business at a specific time
To show the profit or loss made over a period
To record all business assets and liabilities
To calculate the amount of stock held by the business
Why do governments use a company’s income statement? (1 mark)
To assess how much tax the business should pay
To decide whether to give loans to the business
To determine the business’s advertising costs
To compare the business with its competitors
If a business wants to improve its net profit, which of the following would be the best strategy? (1 mark)
Increase expenses and lower prices
Reduce cost of sales and increase revenue
Pay higher dividends to shareholders
Increase inventory levels and hire more employees
What happens if a business's expenses are higher than its gross profit? (1 mark)
It will have a net loss
It will have higher retained profit
It will have a break-even point
It will have a positive cash flow
How do suppliers benefit from analyzing a company's income statement? (1 mark)
To check if the company can pay them on time
To determine how much profit they will make
To find out if employees will get a salary increase
To assess the business’s advertising strategy
A business reports high profit but has little cash available. What could be a possible reason for this? (1 mark)
The business paid all its suppliers in cash
The business made most of its sales on credit
The business had no revenue for the year
The business increased its expenses significantly
Which financial document is used together with an income statement to evaluate a business’s liquidity? (1 mark)
Cash Flow Statement
Balance Sheet
Break-even Chart
Profit Forecast Report
If retained profit increases over time, what does it indicate about the business? (1 mark)
The business is struggling financially
The business is growing and reinvesting profits
The business is reducing its revenue
The business is borrowing more money
