Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Single-step Income Statement

Financial Accounting

4. Merchandising Operations

Single-step Income Statement

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Multiple Choice

Which of the following profitability ratios must be reported on the single-step income statement?

Return on assets (ROA)

Operating profit ratio

Gross profit margin

Earnings per share (EPS)

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Verified step by step guidance

Understand the concept of profitability ratios: Profitability ratios measure a company's ability to generate profit relative to revenue, assets, or equity. Examples include Return on Assets (ROA), Operating Profit Ratio, Gross Profit Margin, and Earnings Per Share (EPS).

Recognize the reporting requirements for EPS: Earnings Per Share (EPS) is a profitability ratio that must be reported on the income statement as per Generally Accepted Accounting Principles (GAAP). It is a mandatory disclosure for publicly traded companies.

Learn the formula for EPS: EPS is calculated using the formula:

\frac{Net Income - Preferred Dividends}{Weighted Average Shares Outstanding}

. This calculation provides the earnings attributable to each share of common stock.

Understand why other ratios are not reported on the income statement: Ratios like ROA, Operating Profit Ratio, and Gross Profit Margin are useful for analysis but are not required to be disclosed on the income statement. They are typically calculated using data from the financial statements for internal or external analysis.

Conclude that EPS is the correct answer: Based on the requirements of GAAP and the nature of the income statement, EPS is the profitability ratio that must be reported on the single-step income statement.