Question

A firm's comprehensive income always:

a)Is the same as its net income.
b)Is greater than its net income.
c)Is less than its net income.
d)Could be greater than or less than net income.

Answer 1

A firm's comprehensive income could be greater than or less than net income depending on additional items included in the calculation.

Step-by-step explanation:

A firm's comprehensive income could be greater than or less than net income. The key difference between comprehensive income and net income is that net income only includes revenues and expenses from regular business operations, while comprehensive income includes additional items such as gains or losses from foreign currency translation, unrealized gains or losses on investments, and gains or losses from pension plan adjustments.

For example, if a company has a net income of $100,000 but also has a foreign currency translation gain of $20,000 and an unrealized loss on investments of $10,000, its comprehensive income would be $110,000. On the other hand, if the company had a net income of $100,000 but also had a foreign currency translation loss of $20,000 and an unrealized gain on investments of $10,000, its comprehensive income would be $90,000.

So, the comprehensive income can be greater or less than the net income depending on the additional items included in the calculation.