Income Statement

Question 1

Is Operating and Non Operating Portion of Income Statement reported together ?

Answer 1

Operating and Non Operating Income are reported separately in the income statement

Question 2

What is the non operating income for Non Financial Firms ?

Answer 2

Non operating transactions may result from investment income and financing expenses (interest)

The income from and the gains and losses on the sales of these securities are not a part of the firm’s normal business operations

Question 3

What is operating for a Financial Firm ?

Answer 3

For a financial firm income,gains and losses may be considered operating income

Question 4

Gross Vs Net Revenue Reporting

Answer 4

Under Gross Revenue Reporting the selling firm reports sales revenue and COGS separately

Under net revenue reporting only the difference between sales and cost is reported .

Question 5

What is Discontinued Operations for a firm ?

Answer 5

1: - A discontinued operation (must be physically and operationally distinct from rest of the firm) is one that management has decided to dispose of in the current period after operations has generated income or losses .
2: - Income and Losses from discontinued operations are reported separately in the income statement Net of tax after income from continuing operations
3: - While discontinued operations do not affect net income from continuing operations the analyst must decide their effect on firm earnings and cash flows in the future

Question 6

Potentially Dilutive Securities

Answer 6

These securities include stock options,warrants,convertible debt and convertible preferred stock