Read a financial statement against the clock: a sample question
Most people can name the three financial statements. Fewer can open one and say what is going on. Here is one question of the kind the app asks.
| Sample company · income statement | This year | Last year |
|---|---|---|
| Revenue | 1,200 | 1,000 |
| Cost of sales | 780 | 620 |
| Gross profit | 420 | 380 |
| Selling, general and administrative | 300 | 250 |
| Operating income | 120 | 130 |
Teaching material · figures are invented, in millions, and belong to no real company
Revenue grew 20 percent. Did the gross margin rise, hold or fall? — show the answer
It fell. Gross profit over revenue was 380 over 1,000, or 38 percent, last year, and 420 over 1,200, or 35 percent, this year. Cost of sales grew faster than revenue, and with overheads also up, operating income slipped from 130 to 120 in a year when sales rose by a fifth. The headline number went one way and the business went the other.
| Level | Choices | What the statement looks like |
|---|---|---|
| Level 1 | Three | A simplified statement with the important figures colour-coded. |
| Level 2 | Four | A plain, properly formatted table with two periods. No colour, no hints. |
| Level 3 | Five, select all that apply | A dense excerpt in the style of a real filing, with note references and figures in parentheses. |
A set is seven questions. The questions cover balance sheets, income statements, cash flow statements, ratio tables, segment breakdowns and guidance slides, and accounting terms can be shown under US GAAP, IFRS or Japanese GAAP names.
One question here. The timed sets, the answers highlighted on the statement itself and a chart of your accuracy by category are in Earnings Reading Trainer.