Income Statement quiz level 2 Financial Accounting Quiz On Apr 6, 2026 Share Follow the Facebook page Accountants Quiz and join the group Accounting QuizIncome Statement quiz level 1 Income Statement quiz level 2 Income Statement level 2 Pass Score 70% The questions change when you repeat the exam 1 / 30 Contribution margin equals : Net income + tax Gross profit − expenses Revenue − variable costs Revenue − fixed costs 2 / 30 Which ratio uses income statement data only ? Current ratio Return on assets Debt-to-equity Gross margin It uses revenue and COGS. 3 / 30 Pro-forma income statements are used to : Report past performance Calculate taxes Hide losses Show expected future results They project financial performance. 4 / 30 Which best indicates efficiency in controlling costs ? Asset turnover Gross margin trend Revenue growth Current ratio Shows cost control over time. 5 / 30 Vertical analysis helps compare : Different companies of different sizes Assets and liabilities One company over time Cash flows 6 / 30 Amortization applies to : Inventory Buildings Intangible assets Cash 7 / 30 A steady increase in net income suggests : Improving performance Poor management Lower revenue Higher liabilities Assuming earnings quality is good. 8 / 30 Which margin best reflects overall profitability ? Net profit margin Gross margin Operating margin Contribution margin It includes all expenses. 9 / 30 Which income statement item affects EPS directly ? Revenue Net income Assets Expenses EPS is based on net income. 10 / 30 Operating margin equals : EBIT ÷ Assets Gross profit ÷ Revenue Net income ÷ Revenue Operating income ÷ Revenue It shows operating efficiency. 11 / 30 EBITDA excludes : Depreciation and amortization Operating income Revenue Gross profit 12 / 30 Segment reporting helps users : Measure cash flow Compare departments or product lines Record transactions Calculate tax It shows performance by business segment. 13 / 30 Diluted EPS considers : Only current shares Assets Potential shares Preferred stock only Includes options and convertible securities. 14 / 30 Which improves net income without improving operations ? Selling land at a gain Improving efficiency Increasing sales Reducing COGS It’s non-operating and not sustainable. 15 / 30 Contribution margin ratio equals: Contribution margin ÷ Revenue Gross profit ÷ Assets Fixed costs ÷ Revenue Net income ÷ Revenue Shows how much revenue covers fixed costs. 16 / 30 Discontinued operations are reported : In assets In equity After operating income Before operating income 17 / 30 Which statement is most useful for profitability analysis ? Cash flow statement Notes only Income statement Balance sheet It focuses on revenues and expenses. 18 / 30 A common-size income statement shows : Dollar values only Assets and liabilities Cash flows Percentages only Each item is a percentage of revenue. 19 / 30 Income smoothing refers to : Stabilizing reported income over time Accurate reporting Increasing cash flow Eliminating expenses Sometimes done to appear less risky. 20 / 30 Horizontal analysis focuses on : Ratios Trends over time Percentages Industry averages 21 / 30 Recurring income is : One-time Regular and ongoing Non-cash Unpredictable It comes from normal business activities. 22 / 30 Return on sales equals : Revenue ÷ Assets Net income ÷ Equity Gross profit ÷ Assets Net income ÷ Revenue Another name for net profit margin. 23 / 30 Which income is considered low quality ? Gain on asset sale Service income Sales revenue Subscription revenue Gains from asset sales are non-recurring. 24 / 30 Quality of earnings refers to : Sustainability of income Gross profit Size of net income Cash balance High-quality earnings are repeatable and from core operations. 25 / 30 A declining gross margin may indicate : Lower production costs Higher sales prices Lower operating expenses Rising COGS Production costs may be increasing. Operating costs reduce operating profit. 26 / 30 Higher operating expenses will : Increase assets Increase gross profit Increase net income Decrease operating income 27 / 30 High operating leverage means : High variable costs High fixed costs Low risk Low sales 28 / 30 Earnings per share (EPS) equals : Revenue ÷ Shares Net income ÷ Assets Gross profit ÷ Shares Net income ÷ Shares outstanding 29 / 30 Which best helps compare companies of different sizes ? Total net income Common-size statements Revenue Cash balance Percentages allow better comparison. 30 / 30 A loss from discontinued operations is reported : In operating expenses In equity Before gross profit After operating income Shown separately for clarity. Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback Income Statement quiz level 2
