The Income Statement Shows Net Profit Which Is Equal to

question 2

Multiple Choice

The income statement shows net profit which is equal to

• A)earnings before taxes minus taxes.
• B)net sales minus cost of goods sold.
• C)gross revenues minus returns and allowances.
• D)operating income minus operating expenses.
• E)operating income minus interest.

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Definitions:

Marginal Revenue

The increase in revenue that results from selling one more unit of a product.

Profit-Maximizing Output

The level of production at which a firm achieves the highest possible profit, calculated by equating marginal revenue and marginal cost.

Market Price

The amount for which something can be sold on a given market at a particular time, restated for clarity.

Maximizing Profits

The process of adjusting production and operations to achieve the highest possible profit margins under given market conditions.