High School

The income statement shows net sales, which is equal to:

1) earnings before taxes minus taxes
2) gross revenues minus returns and allowances
3) net sales minus cost of goods sold
4) operating income minus interest
5) operating income minus operating expenses

Answer :

Final answer:

The correct option is: (1) Gross revenues minus returns and allowances.

Explanation:

The correct option is: (1) Gross revenues minus returns and allowances. The income statement serves as a financial report summarizing a company's revenue, expenses, and profits over a specific period. Net sales, a crucial figure on this statement, represent the total revenue earned by a business. Gross revenues encompass the total sales generated by a company, and from this, returns and allowances are subtracted. Returns and allowances account for merchandise returns and adjustments provided to customers. The resulting net sales figure reflects the actual revenue realized by the business after considering these deductions. This value is essential for evaluating a company's top-line performance, providing insights into its ability to generate sales revenue and the effectiveness of its sales and marketing strategies. Understanding net sales aids investors, analysts, and management in assessing the company's overall financial health and performance.