Ch. 4 (IFSA) Understanding Income Statements

Question 1

___ communicates how much revenue the company generated during a period and what costs it incurred in connection with generating that revenue.

Answer 1

The income statement

Question 2

The income statement communicates ___.

Answer 2

how much revenue the company generated during a period and what costs it incurred in connection with generating that revenue

Question 3

___ is also called the statement of operations or statement of earnings or, sometimes, in business jargon, it is called the P&L (for profit and loss).

Answer 3

The income statement

Question 4

The income statement is also called ___ or statement of earnings or, sometimes, in business jargon, it is called the P&L (for profit and loss).

Answer 4

the statement of operations

Question 5

The income statement is also called the statement of operations or ___ or, sometimes, in business jargon, it is called the P&L (for profit and loss).

Answer 5

statement of earnings

Question 6

The income statement is also called the statement of operations or statement of earnings or, sometimes, in business jargon, it is called ___.

Answer 6

the P&L (for profit and loss)

Question 7

___ also includes gains and losses, which are asset inflows and outflows, respectively, not directly related to the ordinary activities of the business.

Answer 7

Net income

Question 8

Net income also includes ___, which are asset inflows and outflows, respectively, not directly related to the ordinary activities of the business.

Answer 8

gains and losses

Question 9

Net income also includes gains and losses, which are ___.

Answer 9

asset inflows and outflows, respectively, not directly related to the ordinary activities of the business

Question 10

If a company sells surplus land that is not needed, ___ and the net result is reported as a gain or a loss.

Answer 10

the cost of the land is subtracted from the sales price

Question 11

If a company sells surplus land that is not needed, the cost of the land is subtracted from the sales price and ____.

Answer 11

the net result is reported as a gain or a loss

Question 12

Grouping together expenses such as depreciation on manufacturing equipment and depreciation on administrative facilities into a single line item called depreciation on the income statement represents ___ of the expense.

Answer 12

a grouping by nature

Question 13

An example of ___ on the income statement would be grouping together expenses into a category such as cost of goods sold, which would include some salaries (e.g., salespeople’s), material costs, depreciation, and other direct sales-related expenses.

Answer 13

grouping by function

Question 14

___ is the amount of revenue available after subtracting the costs of delivering goods or services such as material and labor.

Answer 14

Gross profit

Question 15

Gross profit is ___.

Answer 15

the amount of revenue available after subtracting the costs of delivering goods or services such as material and labor

Question 16

___ further deducts operating expenses such as selling, general, administrative, and research and development expenses.

Answer 16

Operating profit

Question 17

Operating profit further deducts operating expenses such as ___.

Answer 17

selling, general, administrative, and research and development expenses

Question 18

___ reflects a company’s profits on its usual business activities before deducting taxes.

Answer 18

Operating profit

Question 19

Operating profit reflects ___.

Answer 19

a company’s profits on its usual business activities before deducting taxes

Question 20

___ are similar to revenue; however, they arise from secondary or peripheral activities rather than from a company’s primary business activities.

Answer 20

Gains

Question 21

Gains are similar to revenue; however, they arise from ___.

Answer 21

secondary or peripheral activities rather than from a company’s primary business activities

Question 22

For a restaurant, the sale of surplus restaurant equipment for more than its cost is referred to as a ___ rather than as revenue.

Answer 22

gain

Question 23

An important concept concerning ___ recognition is that it can occur independently of cash movements.

Answer 23

revenue

Question 24

An important concept concerning revenue recognition is that it can occur independently of ___ movements.

Answer 24

cash

Question 25

A fundamental principle of ___ is that revenue is recognized when it is earned, so the company’s financial records reflect the sale when it is made and a related accounts receivable is created.

Answer 25

accrual accounting

Question 26

A fundamental principle of accrual accounting is that ___, so the company’s financial records reflect the sale when it is made and a related accounts receivable is created.

Answer 26

revenue is recognized when it is earned

Question 27

A fundamental principle of accrual accounting is that revenue is recognized when it is earned, so the company’s financial records ___ and a related accounts receivable is created.

Answer 27

reflect the sale when it is made

Question 28

A fundamental principle of accrual accounting is that revenue is recognized when it is earned, so the company’s financial records reflect the sale when it is made and ___.

Answer 28

a related accounts receivable is created

Question 29

Under ___, in each accounting period, the company estimates what percentage of the contract is complete and then reports that percentage of the total contract revenue in its income statement.

Answer 29

the percentage-of-completion method

Question 30

Under the percentage-of-completion method, in each accounting period, the company ___.

Answer 30

estimates what percentage of the contract is complete and then reports that percentage of the total contract revenue in its income statement

Question 31

Under the ___, the company does not report any revenue until the contract is finished.

Answer 31

completed contract method

Question 32

Under the completed contract method, the company ___.

Answer 32

does not report any revenue until the contract is finished

Question 33

Under ___, the portion of the total profit of the sale that is recognized in each period is determined by the percentage of the total sales price for which the seller has received cash.

Answer 33

the installment method

Question 34

Under the installment method, the portion of the total profit of the sale that is recognized in each period is determined by ___.

Answer 34

the percentage of the total sales price for which the seller has received cash

Question 35

Under ___, the seller does not report any profit until the cash amounts paid by the buyer—including principal and interest on any financing from the seller—are greater than all the seller’s costs of the property.

Answer 35

the cost recovery method

Question 36

Under the cost recovery method, the seller does not report any profit until ___.

Answer 36

the cash amounts paid by the buyer—including principal and interest on any financing from the seller—are greater than all the seller’s costs of the property

Question 37

A general principle of ___ is the matching principle, also known as the “matching of costs with revenues.”

Answer 37

expense recognition

Question 38

A general principle of expense recognition is ___.

Answer 38

the matching principle, also known as the “matching of costs with revenues”

Question 39

Under ___, a company directly matches some expenses (e.g., cost of goods sold) with associated revenues

Answer 39

the matching principle

Question 40

Under the matching principle, a company directly matches ___

Answer 40

some expenses (e.g., cost of goods sold) with associated revenues

Question 41

___, expenditures that less directly match the timing of revenues, are reflected in the period when a company makes the expenditure or incurs the liability to pay.

Answer 41

Period costs

Question 42

Period costs, ___, are reflected in the period when a company makes the expenditure or incurs the liability to pay.

Answer 42

expenditures that less directly match the timing of revenues

Question 43

Period costs, expenditures that less directly match the timing of revenues, are reflected in the period when ___.

Answer 43

a company makes the expenditure or incurs the liability to pay

Question 44

Under ___, at the time revenue is recognized on a sale, a company is required to record an estimate of how much of the revenue will ultimately be uncollectible.

Answer 44

the matching principle

Question 45

Under the matching principle, at the time ___, a company is required to record an estimate of how much of the revenue will ultimately be uncollectible.

Answer 45

revenue is recognized on a sale

Question 46

Under the matching principle, at the time revenue is recognized on a sale, a company is required to ___.

Answer 46

record an estimate of how much of the revenue will ultimately be uncollectible

Question 47

The company records its estimate of uncollectible amounts as ___, not as a direct reduction of revenues.

Answer 47

an expense on the income statement

Question 48

Under the matching principle, a company is required to ___, to recognize an estimated warranty expense in the period of the sale, and to update the expense as indicated by experience over the life of the warranty.

Answer 48

estimate the amount of future expenses resulting from its warranties

Question 49

Under the matching principle, a company is required to estimate the amount of future expenses resulting from its warranties, to ___, and to update the expense as indicated by experience over the life of the warranty.

Answer 49

recognize an estimated warranty expense in the period of the sale

Question 50

Under the matching principle, a company is required to estimate the amount of future expenses resulting from its warranties, to recognize an estimated warranty expense in the period of the sale, and to ___.

Answer 50

update the expense as indicated by experience over the life of the warranty

Question 51

The two main types of long-lived assets whose costs are not allocated over time are ___ and those intangible assets with indefinite useful lives.

Answer 51

land

Question 52

The two main types of long-lived assets whose costs are not allocated over time are land and ___.

Answer 52

those intangible assets with indefinite useful lives

Question 53

The two main types of long-lived assets whose costs are ___ are land and those intangible assets with indefinite useful lives.

Answer 53

not allocated over time

Question 54

___ is the process of systematically allocating costs of long-lived assets over the period during which the assets are expected to provide economic benefits.

Answer 54

Depreciation

Question 55

Depreciation is ___ during which the assets are expected to provide economic benefits.

Answer 55

the process of systematically allocating costs of long-lived assets over the period

Question 56

Depreciation is the process of systematically allocating costs of long-lived assets over the period during which ___.

Answer 56

the assets are expected to provide economic benefits

Question 57

___ is the term commonly applied to the process of systematically allocating costs for intangible long-lived assets with a finite useful life.

Answer 57

Amortization

Question 58

Amortization is the term commonly applied to the process of systematically allocating costs for ___ with a finite useful life.

Answer 58

intangible long-lived assets

Question 59

Amortization is the term commonly applied to the process of systematically allocating costs for intangible long-lived assets with ___.

Answer 59

a finite useful life

Question 60

___ allocates evenly the cost of long-lived assets less estimated residual value over the estimated useful life of an asset.

Answer 60

The straight-line method

Question 61

The straight-line method ___ less estimated residual value over the estimated useful life of an asset.

Answer 61

allocates evenly the cost of long-lived assets

Question 62

The straight-line method allocates evenly the cost of long-lived assets ___ over the estimated useful life of an asset.

Answer 62

less estimated residual value

Question 63

The straight-line method allocates evenly the cost of long-lived assets less estimated residual value ___.

Answer 63

over the estimated useful life of an asset

Question 64

Calculating ___ requires two significant estimates: the estimated useful life of an asset and the estimated residual value (also known as salvage value) of an asset.

Answer 64

depreciation and amortization

Question 65

Calculating depreciation and amortization requires two significant estimates: ___ and the estimated residual value (also known as salvage value) of an asset.

Answer 65

the estimated useful life of an asset

Question 66

Calculating depreciation and amortization requires two significant estimates: the estimated useful life of an asset and ___.

Answer 66

the estimated residual value (also known as salvage value) of an asset

Question 67

Generally, alternatives to the straight-line method of depreciation are called ___ because ___.

Answer 67

accelerated methods of depreciation / they accelerate (i.e., speed up) the timing of depreciation

Question 68

___ allocate a greater proportion of the cost to the early years of an asset’s useful life

Answer 68

Accelerated depreciation methods

Question 69

Accelerated depreciation methods allocate ___

Answer 69

a greater proportion of the cost to the early years of an asset’s useful life.

Question 70

A company’s estimates for doubtful accounts and/or for warranty expenses can affect its reported ___.

Answer 70

net income

Question 71

A company’s choice of depreciation or amortization method, estimates of assets’ useful lives, and estimates of assets’ residual values can affect reported ___.

Answer 71

net income

Question 72

A policy that results in recognition of ___ is considered less conservative.

Answer 72

expenses later rather than sooner

Question 73

To assess a company’s ___, it is helpful to separate those prior years’ items of income and expense that are likely to continue in the future from those items that are less likely to continue.

Answer 73

future earnings

Question 74

To assess a company’s future earnings, it is helpful to separate those prior years’ items of ___ that are likely to continue in the future from those items that are less likely to continue.

Answer 74

income and expense

Question 75

To assess a company’s future earnings, it is helpful to separate those prior years’ items of income and expense that are ___.

Answer 75

likely to continue in the future from those items that are less likely to continue

Question 76

Some items from prior years are clearly not expected to continue in the future periods and are separately disclosed on a company’s ___.
- discontinued operations
- extraordinary items (no longer permitted under IFRS)

Answer 76

income statement

Question 77

Some items from prior years are clearly not expected to continue in the future periods and are separately disclosed on a company’s income statement.
- ___
- extraordinary items (no longer permitted under IFRS)

Answer 77

discontinued operations

Question 78

Some items from prior years are clearly not expected to continue in the future periods and are separately disclosed on a company’s income statement.
- discontinued operations
- ___

Answer 78

extraordinary items (no longer permitted under IFRS)

Question 79

The terms ___, common stock, and common shares are used equivalently.

Answer 79

ordinary shares

Question 80

The terms ordinary shares, ___, and common shares are used equivalently.

Answer 80

common stock

Question 81

The terms ordinary shares, common stock, and ___ are used equivalently.

Answer 81

common shares

Question 82

When a company has any securities that are potentially convertible into common stock, it is said to have ___.

Answer 82

a complex capital structure

Question 83

When a company ___, it is said to have a complex capital structure.

Answer 83

has any securities that are potentially convertible into common stock

Question 84

Specific examples of ___ include convertible bonds, convertible preferred stock, employee stock options, and warrants.

Answer 84

securities that are potentially convertible into common stock

Question 85

Specific examples of securities that are potentially convertible into common stock include ___, convertible preferred stock, employee stock options, and warrants.

Answer 85

convertible bonds

Question 86

Specific examples of securities that are potentially convertible into common stock include convertible bonds, ___, employee stock options, and warrants.

Answer 86

convertible preferred stock

Question 87

Specific examples of securities that are potentially convertible into common stock include convertible bonds, convertible preferred stock, ___, and warrants.

Answer 87

employee stock options

Question 88

Specific examples of securities that are potentially convertible into common stock include convertible bonds, convertible preferred stock, employee stock options, and ___.

Answer 88

warrants

Question 89

If a company’s capital structure does not include securities that are potentially convertible into common stock, it is said to have ___.

Answer 89

a simple capital structure

Question 90

If a company’s capital structure ___, it is said to have a simple capital structure.

Answer 90

does not include securities that are potentially convertible into common stock

Question 91

The distinction between___ is relevant to the calculation of EPS because any securities that are potentially convertible into common stock could, as a result of conversion, potentially dilute (i.e., decrease) EPS.

Answer 91

simple versus complex capital structure

Question 92

The distinction between simple versus complex capital structure is relevant to ___ because any securities that are potentially convertible into common stock could, as a result of conversion, potentially dilute (i.e., decrease) EPS.

Answer 92

the calculation of EPS

Question 93

The distinction between simple versus complex capital structure is relevant to the calculation of EPS because ___.

Answer 93

any securities that are potentially convertible into common stock could, as a result of conversion, potentially dilute (i.e., decrease) EPS

Question 94

Accounting standards require companies to disclose what their EPS would be if all ___ were converted into common stock.

Answer 94

dilutive securities

Question 95

Accounting standards require companies to disclose what their EPS would be if all dilutive securities were ___.

Answer 95

converted into common stock

Question 96

___ is the amount of income available to common shareholders divided by the weighted average number of common shares outstanding over a period.

Answer 96

Basic EPS

Question 97

Basic EPS is ___ divided by the weighted average number of common shares outstanding over a period.

Answer 97

the amount of income available to common shareholders

Question 98

Basic EPS is the amount of income available to common shareholders divided by ___.

Answer 98

the weighted average number of common shares outstanding over a period

Question 99

___ is the amount of net income remaining after preferred dividends (if any) have been paid.

Answer 99

The amount of income available to common shareholders

Question 100

The amount of income available to common shareholders is ___.

Answer 100

the amount of net income remaining after preferred dividends (if any) have been paid

Question 101

___ = (Net income – Preferred dividends) ÷ Weighted average number of shares outstanding

Answer 101

Basic EPS

Question 102

Basic EPS = (___ – Preferred dividends) ÷ Weighted average number of shares outstanding

Answer 102

Net income

Question 103

Basic EPS = (Net income – ___) ÷ Weighted average number of shares outstanding

Answer 103

Preferred dividends

Question 104

Basic EPS = (Net income – Preferred dividends) ÷ ___

Answer 104

Weighted average number of shares outstanding

Question 105

If a company has ___, then its basic EPS is equal to its diluted EPS.

Answer 105

a simple capital structure (i.e., one with no potentially dilutive securities)

Question 106

If a company has a simple capital structure (i.e., one with no potentially dilutive securities), then its ___ is equal to its diluted EPS.

Answer 106

basic EPS

Question 107

If a company has a simple capital structure (i.e., one with no potentially dilutive securities), then its basic EPS is equal to its ___.

Answer 107

diluted EPS

Question 108

If a company has ___, its diluted EPS is lower than its basic EPS.

Answer 108

dilutive securities

Question 109

If a company has dilutive securities, its diluted EPS is ___ its basic EPS.

Answer 109

lower than

Question 110

When a company has ___, diluted EPS is calculated using the if-converted method (i.e., what EPS would have been if the convertible preferred securities had been converted at the beginning of the period).

Answer 110

convertible preferred stock outstanding

Question 111

When a company has convertible preferred stock outstanding, diluted EPS is calculated using ___ (i.e., what EPS would have been if the convertible preferred securities had been converted at the beginning of the period).

Answer 111

the if-converted method

Question 112

When a company has convertible preferred stock outstanding, diluted EPS is calculated using the if-converted method (___).

Answer 112

i.e., what EPS would have been if the convertible preferred securities had been converted at the beginning of the period

Question 113

___ using the if-converted method for convertible preferred stock is equal to the amount of net income divided by the weighted average number of shares outstanding plus the new shares of common stock that would be issued upon conversion of the preferred.

Answer 113

The diluted EPS

Question 114

The diluted EPS using the ___ for convertible preferred stock is equal to the amount of net income divided by the weighted average number of shares outstanding plus the new shares of common stock that would be issued upon conversion of the preferred.

Answer 114

if-converted method

Question 115

The diluted EPS using the if-converted method for ___ is equal to the amount of net income divided by the weighted average number of shares outstanding plus the new shares of common stock that would be issued upon conversion of the preferred.

Answer 115

convertible preferred stock

Question 116

The diluted EPS using the if-converted method for convertible preferred stock is equal to ___ divided by the weighted average number of shares outstanding plus the new shares of common stock that would be issued upon conversion of the preferred.

Answer 116

the amount of net income

Question 117

The diluted EPS using the if-converted method for convertible preferred stock is equal to the amount of net income divided by ___ plus the new shares of common stock that would be issued upon conversion of the preferred.

Answer 117

the weighted average number of shares outstanding

Question 118

The diluted EPS using the if-converted method for convertible preferred stock is equal to the amount of net income divided by the weighted average number of shares outstanding plus ___.

Answer 118

the new shares of common stock that would be issued upon conversion of the preferred

Question 119

The formula to calculate diluted EPS using the if-converted method for ___ is:

Diluted EPS = (Net income)/(Weighted average number of shares outstanding + New common shares that would have been issued at conversion)

Answer 119

preferred stock

Question 120

The formula to calculate diluted EPS using the if-converted method for preferred stock is:

Diluted EPS = (___)/(Weighted average number of shares outstanding + New common shares that would have been issued at conversion)

Answer 120

Net income

Question 121

The formula to calculate diluted EPS using the if-converted method for preferred stock is:

Diluted EPS = (Net income)/(___ + New common shares that would have been issued at conversion)

Answer 121

Weighted average number of shares outstanding

Question 122

The formula to calculate diluted EPS using the if-converted method for preferred stock is:

Diluted EPS = (Net income)/(Weighted average number of shares outstanding + ___)

Answer 122

New common shares that would have been issued at conversion

Question 123

The formula to calculate diluted EPS using the if - converted method for ___ is:

Diluted EPS = (Net income + After-tax interest on convertible debt – Preferred dividends)/(Weighted average number of shares outstanding + New common shares that could have been issued at conversion)

Answer 123

convertible debt

Question 124

The formula to calculate diluted EPS using the if - converted method for convertible debt is:

Diluted EPS = (___ + After-tax interest on convertible debt – Preferred dividends)/(Weighted average number of shares outstanding + New common shares that could have been issued at conversion)

Answer 124

Net income

Question 125

The formula to calculate diluted EPS using the if - converted method for convertible debt is:

Diluted EPS = (Net income + ___ – Preferred dividends)/(Weighted average number of shares outstanding + New common shares that could have been issued at conversion)

Answer 125

After-tax interest on convertible debt

Question 126

The formula to calculate diluted EPS using the if - converted method for convertible debt is:

Diluted EPS = (Net income + After-tax interest on convertible debt – ___)/(Weighted average number of shares outstanding + New common shares that could have been issued at conversion)

Answer 126

Preferred dividends

Question 127

The formula to calculate diluted EPS using the if - converted method for convertible debt is:

Diluted EPS = (Net income + After-tax interest on convertible debt – Preferred dividends)/(___ + New common shares that could have been issued at conversion)

Answer 127

Weighted average number of shares outstanding

Question 128

The formula to calculate diluted EPS using the if - converted method for convertible debt is:

Diluted EPS = (Net income + After-tax interest on convertible debt – Preferred dividends)/(Weighted average number of shares outstanding + ___)

Answer 128

New common shares that could have been issued at conversion

Question 129

Under U.S. GAAP, when ___, the diluted EPS is calculated using the treasury stock method (i.e., what EPS would have been if the options had been exercised and the company had used the proceeds to repurchase common stock).

Answer 129

a company has stock options, warrants, or their equivalents outstanding

Question 130

Under U.S. GAAP, when a company has stock options, warrants, or their equivalents outstanding, the diluted EPS is calculated using ___ (i.e., what EPS would have been if the options had been exercised and the company had used the proceeds to repurchase common stock).

Answer 130

the treasury stock method

Question 131

Under U.S. GAAP, when a company has stock options, warrants, or their equivalents outstanding, the diluted EPS is calculated using the treasury stock method (i.e., what EPS would have been if ___).

Answer 131

the options had been exercised and the company had used the proceeds to repurchase common stock

Question 132

The formula to calculate diluted EPS using ___ is:

Diluted EPS = (Net income – Preferred dividends)/(Weighted average number of shares outstanding + New shares that could have been issued at option exercise – Shares that could have been purchased with cash received upon exercise)

Answer 132

the treasury stock method for options

Question 133

The formula to calculate diluted EPS using the treasury stock method for options is:

Diluted EPS = (___ – Preferred dividends)/(Weighted average number of shares outstanding + New shares that could have been issued at option exercise – Shares that could have been purchased with cash received upon exercise)

Answer 133

Net income

Question 134

The formula to calculate diluted EPS using the treasury stock method for options is:

Diluted EPS = (Net income – ___)/(Weighted average number of shares outstanding + New shares that could have been issued at option exercise – Shares that could have been purchased with cash received upon exercise)

Answer 134

Preferred dividends

Question 135

The formula to calculate diluted EPS using the treasury stock method for options is:

Diluted EPS = (Net income – Preferred dividends)/(___ + New shares that could have been issued at option exercise – Shares that could have been purchased with cash received upon exercise)

Answer 135

Weighted average number of shares outstanding

Question 136

The formula to calculate diluted EPS using the treasury stock method for options is:

Diluted EPS = (Net income – Preferred dividends)/(Weighted average number of shares outstanding + ___ – Shares that could have been purchased with cash received upon exercise)

Answer 136

New shares that could have been issued at option exercise

Question 137

The formula to calculate diluted EPS using the treasury stock method for options is:

Diluted EPS = (Net income – Preferred dividends)/(Weighted average number of shares outstanding + New shares that could have been issued at option exercise – ___)

Answer 137

Shares that could have been purchased with cash received upon exercise

Question 138

Two analytical tools to ___: common-size analysis and income statement ratios.

Answer 138

analyze the income statement

Question 139

Two analytical tools to analyze the income statement: ___ and income statement ratios.

Answer 139

common-size analysis

Question 140

Two analytical tools to analyze the income statement: common-size analysis and ___.

Answer 140

income statement ratios

Question 141

___ of the income statement can be performed by stating each line item on the income statement as a percentage of revenue.

Answer 141

Common-size analysis

Question 142

Common-size analysis of the income statement can be performed by ___.

Answer 142

stating each line item on the income statement as a percentage of revenue

Question 143

___ facilitate comparison across time periods (time-series analysis) and across companies of different sizes (cross-sectional analysis).

Answer 143

Common-size statements

Question 144

Common-size statements facilitate ___ (time-series analysis) and across companies of different sizes (cross-sectional analysis).

Answer 144

comparison across time periods

Question 145

Common-size statements facilitate comparison across time periods (___) and across companies of different sizes (cross-sectional analysis).

Answer 145

time-series analysis

Question 146

Common-size statements facilitate comparison across time periods (time-series analysis) and ___ (cross-sectional analysis).

Answer 146

across companies of different sizes

Question 147

Common-size statements facilitate comparison across time periods (time-series analysis) and across companies of different sizes (___).

Answer 147

cross-sectional analysis

Question 148

One indicator of profitability is ___, also known as profit margin and return on sales, which is calculated as net income divided by revenue (or sales).

Answer 148

net profit margin

Question 149

One indicator of profitability is net profit margin, also known as ___ and return on sales, which is calculated as net income divided by revenue (or sales).

Answer 149

profit margin

Question 150

One indicator of profitability is net profit margin, also known as profit margin and ___, which is calculated as net income divided by revenue (or sales).

Answer 150

return on sales

Question 151

One indicator of profitability is net profit margin, also known as profit margin and return on sales, which is calculated as ___ divided by revenue (or sales).

Answer 151

net income

Question 152

One indicator of profitability is net profit margin, also known as profit margin and return on sales, which is calculated as net income divided by ___.

Answer 152

revenue (or sales)

Question 153

___ = Net income ÷ Revenue

Answer 153

Net profit margin

Question 154

Net profit margin = ___ ÷ Revenue

Answer 154

Net income

Question 155

Net profit margin = Net income ÷ ___

Answer 155

Revenue

Question 156

___ measures the amount of income that a company was able to generate for each dollar of revenue.

Answer 156

Net profit margin

Question 157

Net profit margin measures ___ for each dollar of revenue.

Answer 157

the amount of income that a company was able to generate

Question 158

Net profit margin measures the amount of income that a company was able to generate for ___.

Answer 158

each dollar of revenue

Question 159

___ is calculated as revenue minus cost of goods sold, and the gross profit margin is calculated as the gross profit divided by revenue.

Answer 159

Gross profit

Question 160

Gross profit is calculated as ___ minus cost of goods sold, and the gross profit margin is calculated as the gross profit divided by revenue.

Answer 160

revenue

Question 161

Gross profit is calculated as revenue minus ___, and the gross profit margin is calculated as the gross profit divided by revenue.

Answer 161

cost of goods sold

Question 162

Gross profit is calculated as revenue minus cost of goods sold, and ___ is calculated as the gross profit divided by revenue.

Answer 162

the gross profit margin

Question 163

Gross profit is calculated as revenue minus cost of goods sold, and the gross profit margin is calculated as ___ divided by revenue.

Answer 163

the gross profit

Question 164

Gross profit is calculated as revenue minus cost of goods sold, and the gross profit margin is calculated as the gross profit divided by ___.

Answer 164

revenue

Question 165

___ = Gross profit ÷ Revenue

Answer 165

Gross profit margin

Question 166

Gross profit margin = ___ ÷ Revenue

Answer 166

Gross profit

Question 167

Gross profit margin = Gross profit ÷ ___

Answer 167

Revenue

Question 168

___ measures the amount of gross profit that a company generated for each dollar of revenue.

Answer 168

The gross profit margin

Question 169

The gross profit margin measures ___ for each dollar of revenue.

Answer 169

the amount of gross profit that a company generated

Question 170

The gross profit margin measures the amount of gross profit that a company generated for ___.

Answer 170

each dollar of revenue

Question 171

There are certain items of ___ that, by accounting convention, are excluded from the net income calculation, known as other comprehensive income.

Answer 171

revenue and expense

Question 172

There are certain items of revenue and expense that, by accounting convention, are excluded from ___, known as other comprehensive income.

Answer 172

the net income calculation

Question 173

There are certain items of revenue and expense that, by accounting convention, are excluded from the net income calculation, known as ___.

Answer 173

other comprehensive income

Question 174

In U.S. financial statements, according to U.S. GAAP, four types of items are treated as ___.
- Foreign currency translation adjustments.
- Unrealized gains or losses on derivatives contracts accounted for as hedges.
- Unrealized holding gains and losses on a certain category of investment securities, namely, available - for - sale securities.
- Changes in the funded status of a company’s defined benefit postretirement plans.

Answer 174

other comprehensive income

Question 175

In U.S. financial statements, according to U.S. GAAP, four types of items are treated as other comprehensive income.
- ___.
- Unrealized gains or losses on derivatives contracts accounted for as hedges.
- Unrealized holding gains and losses on a certain category of investment securities, namely, available - for - sale securities.
- Changes in the funded status of a company’s defined benefit postretirement plans.

Answer 175

Foreign currency translation adjustments

In consolidating the financial statements of foreign subsidiaries, the effects of translating the subsidiaries’ balance sheet assets and liabilities at current exchange rates are included as other comprehensive income.

Question 176

In U.S. financial statements, according to U.S. GAAP, four types of items are treated as other comprehensive income.
- Foreign currency translation adjustments.
- ___.
- Unrealized holding gains and losses on a certain category of investment securities, namely, available - for - sale securities.
- Changes in the funded status of a company’s defined benefit postretirement plans.

Answer 176

Unrealized gains or losses on derivatives contracts accounted for as hedges

Changes in the fair value of derivatives are recorded each period, but these changes in value for certain derivatives (those considered hedges) are treated as other comprehensive income and thus bypass the income statement.

Question 177

In U.S. financial statements, according to U.S. GAAP, four types of items are treated as other comprehensive income.
- Foreign currency translation adjustments.
- Unrealized gains or losses on derivatives contracts accounted for as hedges.
- ___.
- Changes in the funded status of a company’s defined benefit postretirement plans.

Answer 177

• Unrealized holding gains and losses on a certain category of investment securities, namely, available-for-sale securities

Question 178

In U.S. financial statements, according to U.S. GAAP, four types of items are treated as other comprehensive income.
- Foreign currency translation adjustments.
- Unrealized gains or losses on derivatives contracts accounted for as hedges.
- Unrealized holding gains and losses on a certain category of investment securities, namely, available - for - sale securities.
- ___.

Answer 178

Changes in the funded status of a company’s defined benefit postretirement plans