Firms Should Compare Their Gross, Operating and Net Profit Margins

question 5

Multiple Choice

Firms should compare their gross, operating and net profit margins to past years and other companies in order to [blank].

• A)evaluate the firm's performance
• B)identify expenses that are illegal
• C)better manage the reporting of the firm's earnings
• D)ensure that income statements are compiled on a cash basis

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Definitions:

Net Income

The final earnings tally for a company after subtracting all costs and tax charges from its revenue total.

Adjusting Entry

A journal entry made at the end of an accounting period to record revenues and expenses in the period in which they actually occurred.

Supplies Expense

Represents the cost of supplies used during an accounting period, differentiating from supplies bought but not yet used.

Net Income

The total profit or loss of a company after all expenses, taxes, and costs have been deducted from total revenue, a key indicator of financial performance.