Western Governors University (WGU) ACCT5000 C213 Accounting for Decision Makers Practice Exam

Net income represents the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue. It serves as a key indicator of a company's financial performance over a specific period.

When it comes to discontinued operations and extraordinary items, these are typically included in the bottom line of the income statement, which contributes to net income. Discontinued operations refer to the results of segments of a company that have been closed or disposed of, while extraordinary items are those that are not expected to recur and are exceptional in nature. Their inclusion in net income helps to provide stakeholders with a clearer view of the company’s profitability after accounting for these specific circumstances.

Comprehensive income, on the other hand, encompasses net income plus other comprehensive income items, such as unrealized gains and losses on investments. Operating income focuses strictly on earnings before interest and taxes from ongoing operations, excluding extraordinary events and discontinued operations. Gross profit reflects total revenue minus the cost of goods sold, not incorporating expenses related to ongoing operations or any extraordinary events.

Thus, net income is the appropriate category to capture the overall profitability of a company, inclusive of income from both discontinued operations and extraordinary items.