"Financial Report":Tax rate

B is correct. The two main types of long-lived assets whose costs are not allocated over time are land and those intangible assets with indefinite useful lives.

A is incorrect because a company records an estimate of uncollectible amounts as an expense on the income statement, not as a direct reduction of revenues.

C is incorrect because, under the matching principle, at the time revenue is recognized on a sale, a company is required to record an estimate of how much of the revenue will ultimately be uncollectible.

C is correct. Gross profit margin improved from 33.3% (€775/€2,325) to 35.6% (€930/€2,611). This may be reflective of selling a new, more highly differentiated product.

A is incorrect because the tax rate (which is expressed as tax paid as a percentage of net income) increased year over year, from 26.1% (€120/€460) to 26.7% (€155/€580). This is also true of tax paid as a percentage of revenue, which increased from 5.2% (€120/€2,325) to 5.9% (€155/€2,611) year over year. The company’s profitability was reduced because of the higher tax rate.

B is incorrect because SG&A as a percentage of revenue slightly increased year over year: 2010 = €260/€2,325 = 11.2% and 2011 = €295/€2,611 = 11.3%.