Asked by jimiesha archie on May 25, 2024
Verified
Which of the following transactions will not decrease the net profit margin ratio?
A) Accruing interest expense at year-end.
B) The recording of depreciation expense.
C) Using cash to pay for previously accrued wages.
D) Accruing utilities expense at year-end.
Net Profit Margin Ratio
A financial performance metric that calculates the percentage of net income to revenue, indicating how much profit a company generates from its revenues.
Accruing Interest
The process of recognizing interest expense or income that has been incurred but not yet paid or received, over a period of time.
Depreciation Expense
An accounting method that allocates the cost of tangible assets over their useful lives, reflecting the reduction of value over time.
- Learn the essential concepts related to the acknowledgment of revenue and the recording of expenditures.
- Assess the repercussions of transactions on various financial reports, including balance sheets, income statements, and statements of cash flows.
Verified Answer
GH
grace heltonMay 25, 2024
Final Answer :
C
Explanation :
Using cash to pay for previously accrued wages will not affect the net profit margin ratio as it is simply a payment of an expense that has already been recorded. Whereas accruing interest expense, depreciation expense, and utilities expense will all decrease the net profit margin ratio, as they are expenses that directly reduce the profit earned by the company.
Learning Objectives
- Learn the essential concepts related to the acknowledgment of revenue and the recording of expenditures.
- Assess the repercussions of transactions on various financial reports, including balance sheets, income statements, and statements of cash flows.