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