Which of the following misstatements would cause the net profit margin ratio to be overstated?
A)Capitalizing costs that should have been expensed.
B)Failing to adjust for amortization in the current period.
C)Failing to accrue income taxes of the current period.
D)All of the above.

Question

Quizplus · Accepted Answer

A) Capitalizing costs that should have been expensed would lead to an overstatement of assets and an understatement of expenses, thus overstating the net profit margin ratio.
B) Failing to adjust for amortization in the current period would understated expenses, therefore overstating the net profit margin ratio.
C) Failing to accrue income taxes of the current period would understate expenses, leading to an overstated net profit margin ratio. Therefore, all of the above choices would cause the net profit margin ratio to be overstated.

Which of the Following Misstatements Would Cause the Net Profit