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 Operating costs reduce operating profit.1 / 30 Higher operating expenses will : Increase gross profit Decrease operating income Increase assets Increase net income 2 / 30 Break-even point is when : Net income is maximized Revenue exceeds expenses Revenue equals expenses Cash flow is positive Profit is zero at break-even. 3 / 30 The income statement helps investors mainly to : Calculate dividends directly Assess profitability Determine asset values Measure liquidity Profitability drives investment decisions. 4 / 30 Which item is usually excluded from EBITDA ? Salaries Rent Utilities Depreciation EBITDA excludes depreciation and amortization. 5 / 30 Diluted EPS considers : Preferred stock only Only current shares Assets Potential shares Includes options and convertible securities. 6 / 30 Contribution margin equals : Net income + tax Gross profit − expenses Revenue − variable costs Revenue − fixed costs 7 / 30 Earnings per share (EPS) equals : Net income ÷ Assets Gross profit ÷ Shares Net income ÷ Shares outstanding Revenue ÷ Shares 8 / 30 Which best helps compare companies of different sizes ? Common-size statements Total net income Revenue Cash balance Percentages allow better comparison. 9 / 30 A declining gross margin may indicate : Lower operating expenses Rising COGS Lower production costs Higher sales prices Production costs may be increasing. 10 / 30 Pro-forma income statements are used to : Show expected future results Report past performance Hide losses Calculate taxes They project financial performance. 11 / 30 Which income statement item affects EPS directly ? Assets Net income Revenue Expenses EPS is based on net income. 12 / 30 Discontinued operations are reported : In equity Before operating income In assets After operating income 13 / 30 Net profit margin equals : Net income ÷ Revenue Revenue ÷ Expenses Gross profit ÷ Revenue Net income ÷ Assets 14 / 30 Vertical analysis helps compare : Different companies of different sizes Assets and liabilities Cash flows One company over time 15 / 30 Recurring income is : One-time Unpredictable Non-cash Regular and ongoing It comes from normal business activities. 16 / 30 Quality of earnings refers to : Cash balance Size of net income Sustainability of income Gross profit High-quality earnings are repeatable and from core operations. 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 Contribution margin ratio equals: Gross profit ÷ Assets Contribution margin ÷ Revenue Net income ÷ Revenue Fixed costs ÷ Revenue Shows how much revenue covers fixed costs. 19 / 30 Which statement is most useful for profitability analysis ? Cash flow statement Income statement Notes only Balance sheet It focuses on revenues and expenses. 20 / 30 Operating margin equals : Gross profit ÷ Revenue EBIT ÷ Assets Operating income ÷ Revenue Net income ÷ Revenue It shows operating efficiency. 21 / 30 Gross profit increases when : Revenue decreases COGS decreases Expenses increase COGS increases 22 / 30 Which margin best reflects overall profitability ? Gross margin Net profit margin Operating margin Contribution margin It includes all expenses. 23 / 30 A company with high fixed costs will have : Low break-even point High operating leverage No risk Low operating leverage Fixed costs increase sensitivity to sales changes. 24 / 30 Which best indicates efficiency in controlling costs ? Gross margin trend Current ratio Asset turnover Revenue growth Shows cost control over time. 25 / 30 Which improves net income without improving operations ? Reducing COGS Increasing sales Selling land at a gain Improving efficiency It’s non-operating and not sustainable. 26 / 30 A steady increase in net income suggests : Higher liabilities Improving performance Lower revenue Poor management Assuming earnings quality is good. 27 / 30 A common-size income statement shows : Percentages only Assets and liabilities Cash flows Dollar values only Each item is a percentage of revenue. 28 / 30 Horizontal analysis focuses on : Percentages Trends over time Industry averages Ratios 29 / 30 High operating leverage means : Low risk Low sales High fixed costs High variable costs 30 / 30 Amortization applies to : Cash Buildings Inventory Intangible assets Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback Income Statement quiz level 2
