Practice question · Match the pairs
Match each profit line to what it measures.
- Gross profit
- EBIT
- Net profit
- Gross margin
- Profit from operations, before financing and tax
- Revenue minus the cost of making the product
- The share of revenue left after direct costs
- What remains after all costs, interest, and tax
Hints
- Each line removes one more layer of cost.
- The first line removes only production costs.
Show the answer
- Gross profit → Revenue minus the cost of making the product
- EBIT → Profit from operations, before financing and tax
- Net profit → What remains after all costs, interest, and tax
- Gross margin → The share of revenue left after direct costs
Why
Three profit lines, one ratio, each peeling back a different cost layer to answer a different question.
Practise The Income Statement
The app has 5 more questions on this lesson, and keeps your place in the course. Business I is free to start.
More questions on The Income Statement
- Which items appear on the income statement (not the balance sheet)?
- Net profit flows into retained earnings on the balance sheet at period-end.
- Order the income-statement waterfall from top to bottom.
- A firm has revenue 2,000, COGS 1,200, OPEX 500, interest 100, and tax 50. Estimate the net margin (net profit…
- Revenue or expense? Sort each item.
- Analysts often compare firms on EBITDA rather than net profit. What does stripping out interest, tax,…
- Two firms have identical EBIT of 200, but Firm A has interest expense 80 and Firm B has interest expense 10.…