(L.O. 3) In a multiple-step income statement, the excess of gross profit over operating expenses is called:

a. net margin.

b. income from operations.

c. net profit.

d. earnings.

Approach and Explanation: Visualize a multiple-step income statement. Net sales less cost of goods sold yields gross profit (sometimes called gross margin). Gross profit less operating expenses equals income from operations. From there, other revenues and gains are added, other expenses and losses are deducted, and income tax expense is deducted to arrive at net income. Another popular name for net income is earnings. Net profit would likely refer to net income. Net margin is not a term applied to the income statement. (Solution = b.)