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