Components of an income statement:

• The income statement typically covers a period of a year or a quarter
• Rental income is generated by leasing out business assets.


  True
• The income statement measures a business's financial performance over a specific period.


  True
• A financial statement that shows a business's revenue, expenses, and profit or loss over a specific period is called an income
• Understanding main revenue sources is crucial for assessing a business's financial performance.


  True
• Direct costs are directly attributable to producing goods or providing services.


  True
• Gross profit is calculated by deducting the cost of goods sold from revenue
• What does net income represent in a financial statement?

  Final profit or loss
• Operating Income is the profit from the business's core operations
• Net income is a crucial metric for evaluating a business's overall profitability and financial health.

  True
• Give an example of a non-operating expense.

  Interest on loans
• Revenue is the total earnings from sales
• Rental income is revenue from leasing out business assets
• What is the formula to calculate gross profit?

  Revenue - COGS
• What is the formula to calculate operating income?

  Gross Profit - Operating Expenses
• Operating income is crucial for evaluating a business's core profitability and efficiency
• Net income is calculated as operating income minus interest expense and taxes
• Net income is a crucial metric for evaluating a business's overall profitability and financial health
• What are non-operating expenses related to?

  Costs outside core business
• What is gross profit calculated by subtracting from revenue?

  COGS
• Understanding the order of items on an income statement is crucial for interpreting a business's financial performance

  True
• What is the purpose of an income statement?

  Measures financial performance
• What is a main revenue source for a business?

  Sales of goods/services
• What is the formula for calculating gross profit?

  Revenue - Cost of Goods Sold
• Match the revenue source with its description:

  Sales of goods/services ↔️ Revenue from selling products

  Rental income ↔️ Revenue from leasing assets

  Interest income ↔️ Revenue from investments
• The profit or loss in an income statement is calculated by deducting expenses from revenue
• The two main cost categories a business incurs are direct costs and indirect
• What are examples of indirect costs in a business?

  Rent, utilities, salaries
• Match the expense type with its examples:

  Administrative ↔️ Salaries, rent, utilities

  Selling ↔️ Marketing, advertising, commissions

  Research and Development ↔️ New product testing
• What is the formula to calculate operating income?

  Gross Profit - Operating Expenses
• What is the formula to calculate net income?

  Operating Income - Interest Expense - Taxes
• What are taxes in the context of net income calculation?

  Income taxes the business pays
• Operating Expenses are costs incurred during normal business operations
• What does an income statement measure?

  Financial performance and profitability
• What is the main revenue source for a business?

  Sales of goods/services
• Indirect costs support overall operations but are not directly linked to specific products or services
• Operating income is calculated before interest and taxes.


  True
• Operating income is calculated by subtracting operating expenses from gross profit
• What does net income represent?

  Final profit or loss
• Match the cost category with its description and example:

  COGS ↔️ Direct costs of producing goods ||| Raw materials

  Operating Expenses ↔️ Costs during normal operations ||| Salaries

  Non-Operating Expenses ↔️ Costs unrelated to core business ||| Interest on loans