The Income Statement summarizes a company's operational expenses and profitability over a given period of time. The total value of goods and services sold by a company after deducting all operating costs is the NET OPERATING INCOME The deduction of interest, taxes, and shareholder dividends results in the amount of earnings retained by the company to support operations.

DEPRECIATION is a non-cash bookkeeping entry on the Balance Sheet and on the Income Statement. On the Balance Sheet, it is the sum of all depreciation charges over the life of the fixed assets. On the Income Statement, it represents the portion of the value of a fixed asset that has been used up for operations during the period. You have completed the "Income Statement" section of Financial Statement Analysis. Please complete the Progress Check and then continue with the section on "Cash Flow Statement." If you answer any questions incorrectly, please review the appropriate text.


Directions: Select the correct answer for each question. Check your solution with the Answer Key on the next page.

6. Suppose that a company has NET SALES of $332 million, I NTEREST E XPENSES of $16 million, DEPRECIATION of $6 million, $225 million expenses for LABOR AND MATERIALS, and ADMINISTRATIVE EXPENSES of $42 million. What is the EBIT for that company?
_____ a) $43 million
_____ b) $49 million
_____ c) $59 million
_____ d) $65 million
_____ e) $91 million