Income Statement quiz level 2 Financial Accounting Quiz On Feb 3, 2026 Share Income 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 Which margin best reflects overall profitability ? Gross margin Net profit margin Operating margin Contribution margin It includes all expenses. 2 / 30 Gross profit increases when : COGS increases Revenue decreases COGS decreases Expenses increase 3 / 30 Pro-forma income statements are used to : Calculate taxes Show expected future results Report past performance Hide losses They project financial performance. 4 / 30 A common-size income statement shows : Percentages only Cash flows Dollar values only Assets and liabilities Each item is a percentage of revenue. 5 / 30 Income statement manipulation often involves : Timing of revenue recognition Increasing depreciation Reducing equity Overstating expenses 6 / 30 Which income is considered low quality ? Sales revenue Service income Gain on asset sale Subscription revenue Gains from asset sales are non-recurring. 7 / 30 Which income statement item affects EPS directly ? Assets Net income Revenue Expenses EPS is based on net income. 8 / 30 Recurring income is : Unpredictable Non-cash One-time Regular and ongoing It comes from normal business activities. 9 / 30 Net profit margin equals : Net income ÷ Revenue Gross profit ÷ Revenue Revenue ÷ Expenses Net income ÷ Assets 10 / 30 Break-even point is when : Revenue equals expenses Cash flow is positive Revenue exceeds expenses Net income is maximized Profit is zero at break-even. 11 / 30 Vertical analysis helps compare : Different companies of different sizes Cash flows Assets and liabilities One company over time Operating costs reduce operating profit. 12 / 30 Higher operating expenses will : Decrease operating income Increase net income Increase gross profit Increase assets 13 / 30 A common-size income statement expresses items as a % of : Equity Revenue Total assets Net income 14 / 30 Discontinued operations are reported : In assets In equity After operating income Before operating income 15 / 30 Amortization applies to : Cash Intangible assets Buildings Inventory 16 / 30 Extraordinary items must be : Predictable Frequent Unusual and infrequent Operating 17 / 30 Income smoothing refers to : Eliminating expenses Increasing cash flow Accurate reporting Stabilizing reported income over time Sometimes done to appear less risky. 18 / 30 The income statement helps investors mainly to : Calculate dividends directly Determine asset values Assess profitability Measure liquidity Profitability drives investment decisions. 19 / 30 A company with high fixed costs will have : No risk Low operating leverage Low break-even point High operating leverage Fixed costs increase sensitivity to sales changes. 20 / 30 Which best helps compare companies of different sizes ? Total net income Cash balance Common-size statements Revenue Percentages allow better comparison. 21 / 30 A steady increase in net income suggests : Poor management Higher liabilities Improving performance Lower revenue Assuming earnings quality is good. 22 / 30 Which ratio uses income statement data only ? Debt-to-equity Gross margin Return on assets Current ratio It uses revenue and COGS. 23 / 30 Horizontal analysis focuses on : Percentages Ratios Industry averages Trends over time 24 / 30 Earnings per share (EPS) equals : Net income ÷ Assets Revenue ÷ Shares Net income ÷ Shares outstanding Gross profit ÷ Shares 25 / 30 Which best indicates efficiency in controlling costs ? Revenue growth Gross margin trend Current ratio Asset turnover Shows cost control over time. 26 / 30 Which statement is most useful for profitability analysis ? Notes only Balance sheet Income statement Cash flow statement It focuses on revenues and expenses. 27 / 30 A loss from discontinued operations is reported : In equity In operating expenses Before gross profit After operating income Shown separately for clarity. 28 / 30 A declining gross margin may indicate : Lower operating expenses Rising COGS Higher sales prices Lower production costs Production costs may be increasing. 29 / 30 Return on sales equals : Gross profit ÷ Assets Net income ÷ Equity Net income ÷ Revenue Revenue ÷ Assets Another name for net profit margin. 30 / 30 EBITDA excludes : Revenue Operating income Gross profit Depreciation and amortization Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback Income Statement quiz level 2
