Below Is a Comparative Income Statement for Samson Company: Sams

question 73

Multiple Choice

Below is a comparative income statement for Samson Company: Sams on Comp any Income Statement
For the Years Ended
December 31, 20X6 and 20X5
$\begin{array}{lll}&20X6&20X5\\\text { Sales } & \$ 1,744 & \$ 1,562 \\\text { Less: Cost of goods sold } & \underline{992} & \underline{806} \\\text { Gross profit } & \$ 752 & \$ 756 \\\text { Less op erating expenses: } & &\\\text { Wage expense } & \$ 172 & \$ 160 \\\text { Depreciation expense } & 28 & 26 \\\text { Rent expens } & 36 & 36 \\\text { Miscellaneous expense } & \underline{40} & \underline{70} \\\text { Total operating expenses } & \$ 276 & \$ 292\\\text { Operating income }&\$476&\$464\\\text { Less other expenses: }\\\text { Interest } & \underline{20} & \underline{60} \\\text { Income before tax } & \$ 456 & \$ 404 \\\text { Less: Income tax expense } & \underline{182} & \underline{162} \\\text { Net income } & \$ 274 & \$ 242\end{array}$ If a common- size income statement were prepared, would be attributable to the 20X5 wage expense of Samson Company.

• A) 66.1%
• B) 10.2%
• C) 9.8%
• D) 34.4%

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Definitions:

Free Cash Flow

A measure of financial performance calculated as operating cash flow minus capital expenditures, representing the cash that a company is able to generate after spending the money required to maintain or expand its asset base.

Capital Expenditures

Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.

Cash Dividends

Payments made by a corporation to its shareholders, representing a distribution of profits.

Indirect Method

A technique used in cash flow statement preparation that adjusts net income for changes in balance sheet accounts to calculate operating cash flow.