Costs Are Deducted from Revenue in Several Stages to Show

question 40

Multiple Choice

Costs are deducted from revenue in several stages to show how net income is determined. The first step in this process is to deduct:

• A) costs of damaged goods.
• B) costs of purchased goods
• C) costs of goods mortgaged.
• D) costs of goods sold.

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Definitions:

Annual Interest Rate

The percentage rate charged on a loan or earned on an investment over the period of one year.

Debt-to-equity Ratio

This financial indicator reveals the relative amounts of debt and equity used by a company to support its asset base.

Issuing Bonds

The process by which a company or government borrows money from investors by selling bonds, a form of long-term debt where the issuer promises to pay back the principal along with interest.

Stock

An equity instrument representing ownership interest in a company, entitling the holder to a claim on the company's assets and earnings.