Computations and Comparisons of Accounting Ratios Is Possible Because

question 11

Multiple Choice

Computations and comparisons of accounting ratios is possible because:

• A)the zero point in accounting implies "nothingness" in terms of dollar amount.
• B)accounting measures are on an interval scale.
• C)assets and liabilities are listed in the order of liquidity in the balance sheet.
• D)accounting is a basic classification system.

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Definitions:

Profit Margin

A financial metric that measures the amount of net income earned with each dollar of sales by calculating the percentage of revenue that exceeds the cost of goods sold.

Net Income

The net income of a company, which is the remaining amount after deducting all costs and taxes from the total revenue.

Sales

The revenue a company earns from selling goods or services in its normal operations.

Operating Expenses

Costs associated with running a business's core operations on a daily basis, excluding costs of goods sold.