Overview Of Financial Statements

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| By Jillkredden
J
Jillkredden
Community Contributor
Quizzes Created: 1 | Total Attempts: 259
Questions: 6 | Attempts: 259

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Overview Of Financial Statements - Quiz

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Questions and Answers
  • 1. 

    An income statement is a summary of the revenue generated and expenses paid during a given time period.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    An income statement is a financial statement that provides a summary of the revenue earned and expenses incurred by a company over a specific period. It helps to determine the profitability and financial performance of the business. The statement includes revenue from sales, operating expenses, taxes, and other costs. By analyzing an income statement, stakeholders can assess the company's ability to generate profit, identify trends, and make informed decisions. Therefore, the given statement is true as it accurately describes the purpose and content of an income statement.

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  • 2. 

    Revenues - Expenses = Net Income is the formula associated with the balance sheet.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Revenues - Expenses = Net Income is the formula associated with the income statement.

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  • 3. 

    An income statement is also known as a profit and loss statement.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    An income statement is indeed also known as a profit and loss statement. This financial statement provides a summary of a company's revenues, expenses, and net income over a specific period. It helps to determine the profitability and financial performance of a business. The terms "income statement" and "profit and loss statement" are often used interchangeably in the accounting and financial reporting context.

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  • 4. 

    Liabilities + Owner's equity = Assets is the formula associated with the profit and loss statement.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Liabilities + Owner's equity = Assets is the formula associated with the balance sheet. The profit and loss statement is another name for the income statement.

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  • 5. 

    When forecasting, it is important to consider the price per unit sold and the cost per unit sold.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    When forecasting, it is important to consider the price per unit sold and the cost per unit sold because these factors directly impact the profitability of a business. By analyzing the price per unit sold, businesses can determine the revenue they will generate from each unit sold. On the other hand, the cost per unit sold helps in determining the expenses incurred in producing and selling each unit. By considering both factors, businesses can accurately forecast their sales and make informed decisions regarding pricing, production, and overall profitability.

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  • 6. 

    Using the breakeven point formula, Y = A(x) - B(x), find the number of candy boxes that need to be sold in a month for the business to breakeven.  The boxes of candy sell for $0.25/box.  The variable cost is $0.15/box.  The business has a fixed cost monthly of $250. 

    • A.

      250

    • B.

      2500

    • C.

      25000

    • D.

      None of the above.

    Correct Answer
    B. 2500
    Explanation
    Y = A(x) - B(x)
    Y= 250
    A = 0.25
    B = 0.15
    250 = 0.25(x) - 0.15(x)
    250 = 0.10(x)
    250/0.10 = 0.10(x)/0.10
    2500 = x

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  • Current Version
  • Mar 20, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Oct 10, 2011
    Quiz Created by
    Jillkredden
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