Question

On an income statement, we deduct from gross profits any operating expenses (including marketing and selling expenses, general and administrative expenses, and depreciation expenses) to determine what?

1) cost of goods sold
2) operating profits
3) profits before taxes
4) net profits

Answer 1

On an income statement, deducting operating expenses from gross profits helps determine Operating Profits, also known as Operating Income or Earnings Before Interest and Taxes (EBIT).

Step-by-step explanation:

On an income statement, we deduct from gross profits any operating expenses (including marketing and selling expenses, general and administrative expenses, and depreciation expenses) to determine Operating Profits, also known as Operating Income or Earnings Before Interest and Taxes (EBIT). Operating profits represent the profit earned from a company's core operations, excluding non-operating items such as interest and taxes.