The income statement is the major device for measuring the profitability of a firm over a period of time. True False 2. The income statement measures the increase in the assets of a firm over a period of time. True False 3. Sales minus cost of goods sold is equal to earnings before taxes. True False 4. Sales minus cost of goods sold is equal to gross profit. True False 5. It is not possible for a company with a high gross profit margin to have a low operating profit. True False 6. Operating profit is essentially a measure of how efficient management is in generating revenues and controlling expenses. True False 7. Dividing operating profit by shares outstanding produces earnings per share. True False 8. Accounting income is based on verifiably completed transactions. True False 9. The P/E ratio is strongly related to the past performance of the firm. True False 10. When a firm has a sharp drop off in earnings, its P/E ratio may be artificially high. True False 11. The P/E ratio provides no indication of investors' expectations about the future of a company. True False