Starting with Net Income and Adjusting It for Items That

question 59

Multiple Choice

Starting with net income and adjusting it for items that affected reported net income but not cash is called the

• A) direct method.
• B) indirect method.
• C) working capital method.
• D) cost-benefit method.

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Definitions:

Net Income

The sum a company retains as earnings after deducting taxes and expenses from its total revenue.

Profit Margin Ratio

A financial metric that measures the extent to which a company or business activity makes money, expressed as a percentage of revenue.

Net Income

The company's earnings post all deductions for expenses and taxes from its income.

Net Sales

The total revenue from sales after subtracting returns, allowances for damaged or missing goods, and discounts.