When analyzing a company's income statement,a fact to remember is that:
A)the cost of products sold is another term for gross profit.
B)operating expenses are the costs of everyday operations such as selling expenses.
C)companies are not allowed to offset items such as interest income and interest expense against each other.
D)all expenses will have the word expense after their titles.

Question

Quizplus · Accepted Answer

Operating expenses refer to the costs incurred during the normal course of business operations, such as selling expenses, administrative expenses, and research and development expenses. This is in contrast to the cost of products sold, which includes only the direct costs associated with producing and selling products. Option A is incorrect because the cost of products sold is not another term for gross profit. Gross profit is the amount of revenue remaining after deducting the cost of goods sold. Option C is incorrect because companies are allowed to offset items such as interest income and interest expense against each other, as long as they are reported separately on the income statement. Option D is incorrect because not all expenses will have the word expense after their titles. For example, depreciation is an expense that does not have the word expense in its title.

When Analyzing a Company's Income Statement,a Fact to Remember Is