Why is the amount for operating income important? A. This figure provides a basis for assessing...

Question:

Why is the amount for operating income important?

A. This figure provides a basis for assessing the success of a company apart from its financing and investing activities and separate from its tax status.

B. This is the figure needed for calculating income taxes.

C. Operating income includes all operating revenues and expenses, as well as, interest and taxes related to operations.

D. Operating income provides a basis for assessing the wealth of the firm.

Income Statement:

The income statement is the first financial statement that a company prepared. The statement reports all sales and expenses which affect a company over a time period.

Answer and Explanation:


The answer is A. This figure provides a basis for assessing the success of a company apart from its financing and investing activities and separate from its tax status. and B. This is the figure needed for calculating income taxes.


Operating income provides all income and expenses associated with the operations of the entity. Operating income is the first line of assessing the success or failure of overall operations. Operating income is lowered by interest expense and other extraordinary operations. Without operating income or loss, income taxes could not be calculated.


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Operations of an Income Statement

from Accounting 101: Financial Accounting

Chapter 8 / Lesson 5
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