You're starting your own business and learning how to make it profitable. Now it's time to test your knowledge of the two key financial terms you'll need to run that business: operating income and gross income.
In business operations terms, what does COGS stand for?
- Customized operational gross services
- Cost of goods sold
- Common operational goods sales
If you owned a sneaker company, which of these would be considered a cost of goods sold (COGS)?
- Rubber for the soles
- Employee wages
- Taxes on the shoes
Which of the following would NOT be considered an operating expense?
- Copy paper
Operating income means the same thing as EBIT, which stands for:
- Earnings before interest and taxes
- Engaged business information technology
- Economically balanced income transaction
Operating income is calculated as:
- Gross income plus operating expenses plus depreciation
- Gross income minus operating expenses minus depreciation
- Gross income plus depreciation minus operating expenses
Which is a more accurate way to measure a company's profitability?
- Gross income
- Operating income
- Both are inaccurate
What is another name for gross income?
- Gross profit
- Gross interest
- Gross capital
How would you calculate gross income?
- Sales - cost of goods sold
- Sales + cost of goods sold
- Sales - cost of goods sold - taxes
True or false: Gross income includes salaries and office supplies.
A company with a high gross margin is said to be very:
If a table manufacturer's revenue is $500 per table and it spends $200 to produce each table, as well as $25 in salaries and $25 in office expenses, what is the manufacturer's gross income?
What would that same table manufacturer's operating income be if it makes $500 per table and spends $200 to produce each table, $25 in salaries, and $25 in office expenses?
In 2002, IBM reported the profit from the sale of a subsidiary company as operating income. Is the sale of a company considered operating income?
The amount of money a car manufacturing company earns from selling its automobiles is called:
What is the term used to describe the decrease in value of a company's equipment over time?
If a corporation is selling picnic baskets for $50, current sales are 10,000 units, and the costs are $10 per unit, how much will the operating income change if sales increase by another 10,000 units?
- $200,000 increase
- $400,000 increase
- $600,000 increase
A company's income statement summarizes that company's expenses and revenues at a specific moment in time. True or false?
True or false? Cutting your company's prices to boost sales will increase your gross profit.
If a vacuum cleaner company's operating income decreases, but its gross income stays the same, the company might have:
- Sold fewer vacuum cleaners
- Had a higher electric bill
- Lost a lawsuit
If an electronics company sells $300,000 worth of televisions, its cost of goods sold is $20,000, and its operating expenses are $50,000, what is the company's operating income?