Which of the following is an acceptable method to report total comprehensive income?
On the face of the balance sheet
Total comprehensive income does not have to be reported
In the operating section of the cash flow statement
In the statement of stockholders’ equity
Question 2 2.5 / 2.5 points
Which items below would be classified as operating expenses?
Depreciation, capital leases, and operating profit
Interest expense, interest income, and rent expense
Accounts payable, lease payments, and depreciation
Advertising, selling and administrative, and repairs and maintenance
Question 3 2.5 / 2.5 points
How should gross profit margin be analyzed for firms having more than one revenue source?
The overall gross profit margin should be calculated for all revenue sources.
Gross profit margin cannot be analyzed if a firm has multiple revenue sources.
A separate gross profit margin for each revenue source should be calculated.
The gross profit margins from each revenue source should be calculated and then averaged.
Question 4 2.5 / 2.5 points
Which equation represents an income statement?
Assets = liabilities + stockholders’ equity
Cash in – cash out = net income
Revenues – expenses = net income
Beginning retained earnings + revenues – expenses = ending retained earnings
Question 5 2.5 / 2.5 points
How is earnings per common share calculated?
Operating profit divided by the average number of common stock shares outstanding
Net profit divided by the average number of common and preferred stock shares outstanding
Operating profit divided by the average number of repurchased common stock shares
Net profit divided by the average number of common stock shares outstanding
Question 6 2.5 / 2.5 points
What is another term frequently used when referring to operating profit?
Earnings before interest and taxes (EBIT)
Earnings before interest, taxes, depreciation and amortization (EBITDA)
Earnings before interest (EBI)
Question 7 2.5 / 2.5 points
How does the equity method distort earnings?
Income is recognized even though cash may never be received.
Equity earnings are recorded even if the investor cannot exercise influence over the investee’s policies.
Equity earnings are only recorded on a cash basis of accounting.
Equity earnings are recorded when investment ownership is 100%.
Question 8 2.5 / 2.5 points
Which of the following statements is true?
Only service companies report both cost of goods sold and gross profit.
Cost of goods sold is the largest expense item for many firms.
Cost of goods sold is not affected by the choice of inventory valuation method.
Cost of goods sold equals gross profit.
Question 9 2.5 / 2.5 points
Selling and administrative expenses include which of the following income statement items?
Salaries, insurance, and interest
Salaries, rent, and advertising
Rent, interest, and cost of goods
Advertising, research & development, and amortization
Question 10 2.5 / 2.5 points
Why is it important to assess operating profit?
Operating profit represents the firm’s profits after consideration of all revenues, expenses and comprehensive income.