Operating Income MCQs With Answers
What is operating income?
a) The total revenue generated by a company
b) The profit earned from the core operations of a business
c) The amount of money invested in operating assets
d) The total expenses incurred by a company
Answer: b) The profit earned from the core operations of a business
Operating income is also known as:
a) Net income
b) Gross profit
c) Earnings before interest and taxes (EBIT)
d) Total revenue
Answer: c) Earnings before interest and taxes (EBIT)
Which of the following items is NOT typically included in operating income?
a) Cost of goods sold
b) Research and development expenses
c) Interest expense
d) Selling and administrative expenses
Answer: c) Interest expense
How is operating income calculated?
a) Total revenue minus total expenses
b) Gross profit minus operating expenses
c) Net income minus interest and taxes
d) Gross profit minus cost of goods sold
Answer: b) Gross profit minus operating expenses
Which financial statement includes the operating income?
a) Income statement
b) Balance sheet
c) Cash flow statement
d) Statement of retained earnings
Answer: a) Income statement
Operating Income MCQs With Answers
Why is operating income important for investors and analysts?
a) It provides an overview of a company’s total revenue
b) It helps evaluate a company’s liquidity position
c) It indicates the profitability of a company’s core operations
d) It shows the cash flow generated by a company
Answer: c) It indicates the profitability of a company’s core operations
True or False: A higher operating income always indicates better financial performance.
Answer: False. While a higher operating income is generally desirable, it does not guarantee overall financial performance. Other factors such as taxes, interest expenses, and non-operating income can impact a company’s financial performance.
Which of the following statements is true regarding operating income?
a) It includes non-operating revenues and expenses.
b) It represents the net profit of a company.
c) It reflects the investment income earned by a company.
d) It is calculated by subtracting taxes from net income.
Answer: a) It includes non-operating revenues and expenses.
What does a negative operating income indicate?
a) The company is in financial distress.
b) The company has high operational efficiency.
c) The company’s cost of goods sold is high.
d) The company’s revenue is increasing.
Answer: a) The company is in financial distress.
Operating Income MCQs With Answers
Operating income is useful for comparing the performance of:
a) Companies in different industries.
b) Companies with different revenue sizes.
c) Companies with different ownership structures.
d) Companies with different product portfolios.
Answer: b) Companies with different revenue sizes.