Financial Accounting QuizIncome Statement quiz level 2 06/05/2026 1 min read 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 Discontinued operations are reported : In assets In equity After operating income Before operating income 2 / 30 Gross profit increases when : Revenue decreases COGS decreases COGS increases Expenses increase 3 / 30 Which income statement item affects EPS directly ? Revenue Assets Expenses Net income EPS is based on net income. 4 / 30 Which item is usually excluded from EBITDA ? Utilities Depreciation Salaries Rent EBITDA excludes depreciation and amortization. 5 / 30 Segment reporting helps users : Calculate tax Record transactions Measure cash flow Compare departments or product lines It shows performance by business segment. 6 / 30 EBITDA excludes : Depreciation and amortization Gross profit Operating income Revenue 7 / 30 Horizontal analysis focuses on : Ratios Trends over time Percentages Industry averages 8 / 30 Recurring income is : Regular and ongoing Unpredictable Non-cash One-time It comes from normal business activities. 9 / 30 A loss from discontinued operations is reported : After operating income In operating expenses Before gross profit In equity Shown separately for clarity. 10 / 30 Which margin best reflects overall profitability ? Contribution margin Gross margin Operating margin Net profit margin It includes all expenses. 11 / 30 Income smoothing refers to : Accurate reporting Increasing cash flow Eliminating expenses Stabilizing reported income over time Sometimes done to appear less risky. 12 / 30 A company with high fixed costs will have : High operating leverage Low operating leverage No risk Low break-even point Fixed costs increase sensitivity to sales changes. 13 / 30 A common-size income statement shows : Dollar values only Percentages only Assets and liabilities Cash flows Each item is a percentage of revenue. 14 / 30 Vertical analysis helps compare : One company over time Different companies of different sizes Assets and liabilities Cash flows 15 / 30 A steady increase in net income suggests : Poor management Improving performance Lower revenue Higher liabilities Assuming earnings quality is good. 16 / 30 Contribution margin ratio equals: Net income ÷ Revenue Fixed costs ÷ Revenue Gross profit ÷ Assets Contribution margin ÷ Revenue Shows how much revenue covers fixed costs. 17 / 30 Which best helps compare companies of different sizes ? Total net income Revenue Common-size statements Cash balance Percentages allow better comparison. 18 / 30 Contribution margin equals : Revenue − fixed costs Gross profit − expenses Net income + tax Revenue − variable costs 19 / 30 Break-even point is when : Net income is maximized Cash flow is positive Revenue exceeds expenses Revenue equals expenses Profit is zero at break-even. 20 / 30 Amortization applies to : Inventory Cash Buildings Intangible assets Operating costs reduce operating profit.21 / 30 Higher operating expenses will : Increase assets Decrease operating income Increase net income Increase gross profit 22 / 30 Pro-forma income statements are used to : Report past performance Show expected future results Calculate taxes Hide losses They project financial performance. 23 / 30 Extraordinary items must be : Operating Unusual and infrequent Frequent Predictable 24 / 30 Diluted EPS considers : Preferred stock only Potential shares Assets Only current shares Includes options and convertible securities. 25 / 30 Which improves net income without improving operations ? Increasing sales Selling land at a gain Reducing COGS Improving efficiency It’s non-operating and not sustainable. 26 / 30 Quality of earnings refers to : Cash balance Gross profit Size of net income Sustainability of income High-quality earnings are repeatable and from core operations. 27 / 30 The income statement helps investors mainly to : Assess profitability Determine asset values Calculate dividends directly Measure liquidity Profitability drives investment decisions. 28 / 30 Income statement manipulation often involves : Timing of revenue recognition Increasing depreciation Overstating expenses Reducing equity 29 / 30 Which best indicates efficiency in controlling costs ? Current ratio Revenue growth Asset turnover Gross margin trend Shows cost control over time. 30 / 30 Operating margin equals : Gross profit ÷ Revenue Net income ÷ Revenue Operating income ÷ Revenue EBIT ÷ Assets It shows operating efficiency. Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback 🚀 Join Telegram Group 📢 Telegram Channel 📘 Facebook Group 👍 Facebook Page 📌 Pinterest
