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