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What is the primary method used to classify expenses on a Profit and Loss (P&L) statement?

By their nature

By their function (cost of sales method)

By their relevance to revenue

By their impact on net income

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What does the term "Cost of materials consumed" typically represent on a P&L statement?

The cost of all materials purchased by the company

The cost of raw materials used in manufacturing finished goods

The cost of goods sold during the financial year

The cost of all operating expenses related to production

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What does a negative value for "Change in inventories of finished goods" indicate?

The company sold more goods than it produced during the period

The company produced more goods than it sold during the period

The company's inventory valuation method is incorrect

The company experienced a loss on the sale of finished goods

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What is the key difference between depreciation and amortization?

Depreciation applies to tangible assets, while amortization applies to intangible assets

Depreciation is calculated on a straight-line basis, while amortization uses a declining balance method

Depreciation is a non-cash expense, while amortization is a cash expense

Depreciation is recorded on the balance sheet, while amortization is recorded on the income statement

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How is Profit Before Tax (PBT) calculated?

Total Revenues - Total Operating Expenses

Total Revenues - Cost of Goods Sold

Gross Profit - Operating Expenses

Net Income + Taxes

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What are exceptional items/extraordinary items on a P&L statement?

Recurring expenses that are unusually high

Expenses related to the company's core operations

Expenses incurred in financing activities

Non-recurring expenses that are not expected to occur regularly

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What does the term "bottom line" typically refer to on a P&L statement?

Gross Profit

Operating Income

Profit Before Tax

Profit After Tax

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What does Earnings Per Share (EPS) represent?

The company's net income divided by its total assets

The company's profit per share of preferred stock

The company's profit per share of common stock

The company's total revenue divided by the number of outstanding shares