On the face of the balance sheet

03 Oct On the face of the balance sheet

Which of the following is an acceptable method to report total comprehensive income?

Question options:

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?

Question options:

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?

Question options:

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?

Question options:

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?

Question options:

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?

Question options:

Earnings before interest and taxes (EBIT)

Earnings before interest, taxes, depreciation and amortization (EBITDA)

Net profit

Earnings before interest (EBI)

Question 7 2.5 / 2.5 points

How does the equity method distort earnings?

Question options:

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?

Question options:

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?

Question options:

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?

Question options:

Operating profit represents the firm’s profits after consideration of all revenues, expenses and comprehensive income.

The figure for operating profit provides a basis for assessing the success of the firm apart from its financing and investing activities and separate from tax considerations.

Operating profit represents the firm’s profits after consideration of all revenues and expenses.

Operating profit represents the firm’s profits after consideration of all revenues and expenses, except for taxes.

Question 11 2.5 / 2.5 points

Why is the common-size income statement valuable to the analyst?

Question options:

The common-size income statement shows the relative magnitude of revenues and expenses to total assets.

The common-size income statement allows the analyst to compare the firm to itself from year-to-year, but not to its competitors.

The common-size income statement shows the relative magnitude of revenues and expenses relative to profits.

The common-size income statement shows the relative magnitude of expenses relative to net sales.

Question 12 2.5 / 2.5 points

Use the following information for Jett Co. to answer the next question.

2015 2014

Sales 1,200 1,000

COGS 850 700

Operating expenses 200 200

Income taxes 30 35

Jett Co.’s gross profit, operating profit and net profit margins for 2015 are:

Question options:

50.0%, 32.5%, and 22.5% respectively.