At the End of the Year,a Company Made an Adjusting

question 96

Multiple Choice

At the end of the year,a company made an adjusting entry for prepaid insurance that had expired.Which of the following is true?

• A)Net profit margin ratio will decrease and debt-to-assets ratio will increase.
• B)Net profit margin ratio will increase and debt-to-assets ratio will not change.
• C)Net profit margin ratio will decrease and debt-to-assets ratio will not change.
• D)Net profit margin ratio will not change and debt-to-assets ratio will not change.

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Definitions:

Average Collection Period

The average amount of time it takes for a company to receive payments owed by its customers for goods or services sold on credit.

Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, leading to net profit or loss.

Balance Sheet

A financial statement summarizing a company's assets, liabilities, and shareholders' equity at a specific point in time.

Inventory Turnover

A measure of how quickly a company sells and replaces its stock of goods in a given period.