1. How is a common-size income statement prepared? (Points : 3)

a.Each income statement item is expressed as a percentage of cash flow. b.Each income statement item is expressed as a percentage of net sales. c.Each income statement item is expressed as a percentage of total assets. d. Each income statement item is expressed as a percentage of net income. e. None of the above

2.Selling and administrative expenses include which of the following income statement items? (Points : 3)

a.All of the above b.Rent, interest, cost of goods c.Salaries, insurance, interest d.dAdvertising, research & development, amortization e.Salaries, rent, advertising

3.What is amortization? (Points : 3)

a.The process used to allocate the cost of capital leases, leasehold improvements and intangible assets. b.The process used to allocate the cost of oil, gas, minerals and standing timber. c.The process used to allocate the cost of natural resources. d.The process used to allocate the cost of tangible fixed assets. e. Both a and c

4.Which item would not be classified as an operating expense? (Points : 3)

a. Rent Expense b. Repairs and Maintenance c.None of the above. They are all operating expenses. d.Interest Expense e.Depreciation

5.Why is it important to assess operating profit? (Points : 3)

a.Operating profit represents the firms profits after consideration of all revenues, expenses and comprehensive income. b.Operating profit represents the firms profits after consideration of all revenues and expenses, except for taxes. c. Operating profit represents the firms profits after consideration of all revenues and expenses. d.The figure for operating profit provides a basis for assessing the success of the firm apart from its financing and investing activities and separate from tax considerations.