Financial Statements

Question 1

What is the purpose of an income statement?

Answer 1

To assess a company’s financial performance over a specific period of time.

Question 2

What is the difference between a single step income statement and a multi step income statement?

Answer 2

Single step: All revenues and gains totaled together and subtracted from all expenses and losses totaled together

Multi step: separates operating revenue and expenses from non-operating ones and breaks down expenses further

Question 3

Net Revenue Formula

Answer 3

Sales - Sales Return

Question 4

COGS

Answer 4

Opening inventory
+Purchases
-Ending Inventory

Question 5

Gross Profit

Answer 5

Revenues - COGS

Question 6

What are operating expenses?

Answer 6

Selling expenses, general and admin, research & development, impairment loss (for SEC registrant)

Question 7

What are nonoperating items?

Answer 7

Investment income/expense
Gain or loss on disposal
Unusual or infrequent items
Impairment losses

Question 8

Income from continuing operations

Answer 8

Operating profit
+/- Nonoperating items