Week 2: multi-step income statement Flashcards
1
Q
order of items
A
- calculation of gross profit
- calculation of income from operations
- results of activities not related to operations
2
Q
common ratio to evaluate profitability: gross profit margin
A
-measures the percentage (%) of each dollar of sales that end up as gross profits
gross profit margin (%) = gross profit/net sales
(larger is generally better)
3
Q
evaluating (total) profitability: profit margin
A
measures the percentage (%) of each dollar of sales that end up as profits
profit margin (%) = net income(profit)/net sales
larger is generally better
4
Q
what priority is the income statement prepared
A
the IS is prepared first