Question

True or False

1. Research & Development is an Operating Expense.

2. Cost of revenues include selling, general & administrative expenses.

3. Gross profit is calculated by dividing gross margin by revenues.

4. Interest income is earned on a company’s cash and marketable securities.

5. Non-operating income (expenses) are interest and other income (or expenses) unrelated to the provision of goods or services.

6. Research and development are expenses incurred in enhancing and innovating products.

7. Cost of revenues is calculated by subtracting operating expenses from revenues.

8. Operating expenses are directly related to the provision of goods and services.

9. Earnings per share is not impacted by share issues or repurchases.

10. Revenues are the value generated by providing goods and services to customers.

Answer 1

1. Research & Development is an Operating Expense. Answer True A company incurs research and development expenses in the process of creating new product and therefore are operating expenses which are necessary for business and cannot be avoided. 2. Cost of revenues include selling, general & administrative expenses. Answer False In the cost of revenue, we include those expenses which are directly related to the production but selling, general & administrative expenses cannot be assigned to a specific product 3. Gross profit is calculated by dividing gross margin by revenues. Answer False Gross Profit is calculated by taking the difference between revenues and cost of goods sold. Gross profit percentage or gross profit ratio is calculated by dividing the gross margin by revenues. 4. Interest income is earned on a company's cash and marketable securities. Answer True Yes, the interest income can be earned on company's cash and marketable by investing

5. Non-operating income (expenses) are interest and other income (or expenses) unrelated to the provision of goods or services. Answer True Non-operating income (expenses) are interest and other income (or expenses) unrelated to the core business. These expenses are outside of a company's day to day activities. 6. Research and development are expenses incurred in enhancing and innovating products. Answer True A company incurs research and development expenses in the process of creating new product 7. Cost of revenues is calculated by subtracting operating expenses from revenues. Answer false Cost of revenues is calculated either by subtracting gross margin from revenues or is calculated by following formula beginning finished goods inventory + Purchases or cost of goods manufactured and subtracting ending finished goods inventory.

8. Operating expenses are directly related to the provision of goods and services. Answer false Operating expenses are not directly related to the provision of goods and services. 9. Earnings per share is not impacted by share issues or repurchases. Answer False Earnings per share is impacted by share issues or repurchases as we divide the net income with weighted average number of shares and while calculating weighted average number of shares, we consider share issues and repurchases. 10. Revenues are the value generated by providing goods and services to customers. Answer True Revenues are generated by providing goods and services to the customer.