Ruby Company sold inventory on credit. Its gross profit percentage is 23%. The effect of this transaction is that the:
A) current ratio was unchanged.
B) earnings per share increased.
C) working capital decreased.
D) debt to equity ratio increased.

Question

Quizplus · Accepted Answer

When Ruby Company sells inventory on credit, it recognizes revenue and cost of goods sold, leading to an increase in net income. Since the gross profit percentage is 23%, this indicates that the sale contributes positively to earnings, thus increasing earnings per share.

Ruby Company Sold Inventory on Credit