Kershner Says: "Our Income Statement Should Be Looking Good This

question 42

Multiple Choice

Kershner says: "Our income statement should be looking good this year.We've been doing excellent business this year,so we have a lot of gross sales.The company should be in good shape." Michaels replies: "It remains to be seen how our income statement will look overall.Despite strong sales revenue,the overall income statement might not be as good as we might hope."
Which of the following does Kershner assume?

• A)High revenues equate to a healthy income statement.
• B)Many factors must be considered to calculate the income statement.
• C)The company's revenue next year will be as good as this year's.
• D)Operating expenses have been relatively high this year.
• E)Gross profit is much lower than gross sales.

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Definitions:

Raw Materials Inventory

The total cost of all components and materials a company holds that are yet to be used in the manufacturing process.

Direct Material

Direct Material refers to the raw materials that can be directly attributed to the production of goods, clearly identifiable and quantifiable.

Production Needs

Refers to the resources and requirements necessary to manufacture goods or provide services, including materials, labor, and machinery.

Merchandise Purchases Budget

A financial plan that estimates the cost of inventory a business needs to buy to meet its sales goals.