Which of the Following Independent Transactions Would Cause Net Income

question 6

Multiple Choice

Which of the following independent transactions would cause net income to be more than cash from operating activities?

• A) A decrease in the accounts receivable account
• B) An increase in the merchandise inventory account
• C) An increase in the accounts payable account
• D) An increase in the accrued wages payable account

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Definitions:

DuPont Formula

A financial ratio based formula that measures a company's return on equity by multiplying its net profit margin, asset turnover, and financial leverage.

Investment Turnover

A ratio that measures the efficiency with which a company is able to generate revenue from its investments in assets.

Standard Costs

Predetermined or estimated costs used to measure the performance of a company based on the efficient use of labor and materials.

Actual Costs

The realized expenses incurred in the production of goods or services, as distinguished from estimated costs or budgeted amounts.