When Performing Vertical Analysis on an Income Statement,the Base (Representing

question 113

Multiple Choice

When performing vertical analysis on an income statement,the base (representing the 100% figure_is generally:

• A) net income
• B) gross sales
• C) gross margin
• D) net sales

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Definitions:

Natural-Monopoly Situation

A market condition in which a single firm can produce output at a lower cost than can multiple firms, leading to a monopoly justified by efficiencies of scale.

Implicit Costs

The opportunity costs that arise from using resources that a business already owns rather than earning revenue from those resources elsewhere.

Explicit Costs

Direct, out-of-pocket expenses incurred in conducting a business activity, such as wages, rent, and materials.

Economic Profits

Profits earned by a company after accounting for both explicit (direct) and implicit (opportunity) costs.