Though Two Approaches to Income Statement Analysis Have Been Used

question 6

Multiple Choice

Though two approaches to income statement analysis have been used, there seems to be a trend toward

• A) the full-cost approach.
• B) the cost-allocation approach.
• C) the contribution approach.
• D) the gross-margin approach.
• E) the indirect-cost approach.

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Definitions:

Marginal Propensity

The proportion of an additional unit of income that is used for consumption; more specifically referred to as the marginal propensity to consume.

Net Wealth

The value of assets minus liabilities.

Consumption Spending

The total value of all goods and services consumed by households within a certain period.

Inflation Rate

The percentage change in the price level of goods and services in an economy over a period of time, often indicating the decrease in purchasing power of a currency.