Author Question: If an investor wants to understand how well a firm is performing in their core industry, which ... (Read 158 times)

naturalchemist · **on:** Jul 6, 2018

If an investor wants to understand how well a firm is performing in their core industry, which profit number (gross, operating or net) would be the best to analyze? Explain why.

What will be an ideal response?

Question 2

Which of the following statements is true about Closing Entries?
a. Closing entries close all temporary accounts to a zero balance.
b. Closing entries close all permanent accounts to a zero balance.
c. QuickBooks automatically adjusts your income and expense accounts at year-end to zero them out.
d. All of the above.

FergA · **Reply #1 on:** Jul 6, 2018

Answer to Question 1

Operating profit is the best indicator of how well a firm performs in its core industry. Operating profit includes the sales from its products and services less cost of goods sold and all other operating expenses incurred to sell its products and services. Operating profit does not include nonoperating revenues and expenses such as interest expense, dividend and interest income, gains and losses on sales of assets, equity earnings or taxes. The operating profit amount allows the analyst to assess the operational performance of the firm apart from financing and investing activities.

Answer to Question 2

d