QBANK - Income Statement

Hey folks, What would be your answer to this questin? Which of the following best completes this statement? Operating income from continuing operations: A) is derived from subtracting cost of goods sold, selling, general, administrative, and research expenses from revenues. B) includes cumulative effects of accounting changes. C) is dependent on the company’s capital structure. D) is derived from subtracting cost of goods sold, selling, general, administrative, financing, interest, and tax expenses from revenues

I would say it’s A

I would say it is D. I think interest expense & tax expense are part of CFO.

goel_ar You are getting confused between CFO and Income Statement here. In Income Statement Revenues -------------- Gross Profit --------------------------- Operating Profit from continuing expenses ------------------------ Recurring pretax income from continuing operations +/- Unusual OR Infrequent items ----------------------- Pretax earnings from recurring opns ------------------------- Net Income from continuing operations ------------ This is the I in the IDEA formula / mnemonic After this is D == Income from Discontinued opns net of tax E == Unusual AND infrequent items (Extraordinary items) net of tax A == Accounting changes NET OF TAX -------------------- Net Income ------------ Based on this – A is the right answer. CFO – is a derivation from the NI (Indirect method) or from Sales(Direct method) of the actual Cash flow out from operations.

I think it’s A too…I would’ve just been thrown off a little from the research expense, just because I haven’t seen that used in prior examples, but I guess it makes sense.

You are correct. Thanks for clarification. I am going crazy I guess…