Blue Inc.has the following transactions for the month of April: $$\begin{array} { l r }
\text { Fees earned in cash } & \$ 640,000 \
\text { Expenses paid } & \$ 300,000 \
\text { Dividends paid } & \$ 50,000
\end{array}$$ ?As a result of these transactions, Blue Inc.'s profitability metric:?
A) increases by $340,000.?
B) ?decreases by $300,000.
C) ?increases by $290,000.
D) ?decreases by $640,000.

Question

Blue Inc.has the following transactions for the month of April: $$\begin{array} { l r } 
\text { Fees earned in cash } & \$ 640,000 \
\text { Expenses paid } & \$ 300,000 \
\text { Dividends paid } & \$ 50,000
\end{array}$$ ?As a result of these transactions, Blue Inc.'s profitability metric:?
A) increases by $340,000.?
B) ?decreases by $300,000.
C) ?increases by $290,000.
D) ?decreases by $640,000.

Quizplus · Accepted Answer

Profitability is measured by net income, which is calculated as revenues minus expenses. Here, fees earned in cash ($640,000) are revenues, and expenses paid ($300,000) are subtracted from these revenues. Dividends paid ($50,000) are not considered in calculating profitability because they are distributions of profit, not expenses. Therefore, profitability increases by $340,000 ($640,000 - $300,000).

Blue IncHas the Following Transactions for the Month of April