For Each Transaction Recorded in an Accounting System,the Basic Equation

question 96

Multiple Choice

For each transaction recorded in an accounting system,the basic equation that must be maintained at all times is:

• A)Assets = Liabilities + Stockholders' Equity.
• B)Cash Increases = Cash Decreases.
• C)Revenues = Expenses + Dividends.
• D)Assets = Liabilities.

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Definitions:

Return on Assets

A financial ratio indicating the profitability of a company relative to its total assets, measuring how efficiently assets generate profits.

Fixed Asset Turnover

A financial ratio that measures how efficiently a company uses its fixed assets to generate sales.

Du Pont Identity

A financial formula that breaks down return on equity into three component parts: profit margin, asset turnover, and financial leverage.

Return on Equity

A profitability ratio that highlights the level of profit a company achieves with the capital invested by shareholders.