Kershner says: "Our income statement should be looking good this year. We've been doing excellent business this year, so we have a lot of gross sales. The company should be in good shape." Michaels replies: "It remains to be seen how our income statement will look overall. In spite of strong sales revenue, the overall income statement might not be as good as we might hope."
Which of the following does Kershner assume?
A) High revenues equate to a healthy income statement.
B) Many factors must be taken into account to calculate the income statement.
C) The company's revenue next year will be as good as this year's.
D) Operating expenses have been relatively high this year.
E) Gross profit is much lower than gross sales.

Question

Quizplus · Accepted Answer

Kershner assumes that high gross sales equate to a healthy income statement, without considering other factors such as expenses, taxes, and other deductions. Michaels challenges this assumption by pointing out that the overall income statement might not be as good as expected, despite strong sales revenue.

Kershner Says: "Our Income Statement Should Be Looking Good This