What Is the First Item in an Income Statement Used

question 69

Multiple Choice

What is the first item in an income statement used to determine the net income of a firm?

• A) Earnings before tax
• B) Operating costs
• C) Net sales
• D) Gross profit
• E) Retained earnings

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Definitions:

Fixed Costs

Expenses that do not change with the level of goods or services produced within a certain time span.

Operating Income

The profit realized from a business's core operations, excluding deductions of interest and taxes.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels, providing a more useful comparison to actual costs.

Variable Costs

Expenses that fluctuate directly with changes in production volume or activity level, such as raw materials and direct labor costs.