1. TRUE or FALSE: "The income statement is an accounting statement that matches a

company's revenues with its expenses over a period of time, usually a quarter or a

year"

-True

-False

2. One of the main benefits of the corporation form of business is limited liability

because the shareholders (i.e., owners) of a corporation are only liable for the

amount of their investment (i.e., what they paid for the stock they purchased in the

business).

True

False

3. The XYZ Company has sales of $500,000, a gross profit margin of 40%, operating

expenses (excluding depreciation) of $100,000, depreciation expense of $20,000,

interest expense of $30,000, taxes of $10,000 and dividends paid of $5,000. What is

XYZ's operating profit?

$135,000

$180,000

$160,000

$140,000

None of the above