Question

The income statement begins with revenue and subtracts various operating expenses until arriving at Earnings Before Interest and Taxes. Next, interest expense is subtracted to find the ________ for the period.

A) EBIT
B) after-tax income
C) net income
D) taxable income

Answer 1

D) taxable income

Step-by-step explanation:

A typical income statement is as shown below.

Amount in $'000

Revenue xxx

Cost of sales (xx)

Gross profit xxx

Operating expenses

Selling and distribution expense (xx)

Other administrative expenses (xx)

Operating profit xxx

Interest expense (xx)

Income before tax xxx

Tax expense (xx)

Net income after tax xxx

From the illustration above, interest expense is subtracted to find the taxable income.

Option D) taxable income.