Which of the following statements correctly describes the effect of accruing interest revenue at year-end?
A)Income from operations increases.
B)The net profit margin ratio does not change.
C)The total asset turnover ratio increases.
D)The return on assets ratio is affected.

Question

Quizplus · Accepted Answer

Accruing interest revenue at year-end will increase assets and revenue, thus affecting the return on assets (ROA) ratio. ROA is calculated by dividing net income by total assets. By increasing the numerator (net income) without affecting the denominator (total assets), the ROA ratio will increase.

Which of the Following Statements Correctly Describes the Effect of Accruing