Explanation

The Current Ratio = Current Assets ÷ Current Liabilities.

It evaluates a company’s liquidity and its ability to pay short-term debts.

Explanation

Current assets include cash or assets expected to be converted into cash within one year.

Examples include cash, inventory, and accounts receivable.

Explanation

The Matching Principle aligns expenses with the revenues they help produce.

It ensures accurate profit measurement within a specific accounting period.

Explanation

Asset turnover ratio shows how effectively a company uses its assets to generate sales.

Higher ratio means better efficiency in asset utilization.

Explanation

Cost accounting aims to achieve:

1. Cost Ascertainment: Determining the actual cost of production.
2. Cost Control: Managing and reducing costs to optimize resources.
3. Price Fixation: Setting prices based on costs and market conditions to ensure profitability.

Explanation

The Accrual Principle records expenses when they are incurred, regardless of payment timing.

It ensures financial statements reflect true financial performance during a period.

Explanation

Fixed costs do not change with the level of production (e.g., rent, salaries).

They remain the same whether a company produces nothing or at full capacity.

Explanation

Marginal cost refers to the cost of producing one more unit of output.

It helps in decision-making about increasing or decreasing production levels.

Explanation

Net profit margin = Net profit ÷ Total revenue × 100.

It shows how efficiently a company converts revenue into actual profit.

Explanation

Intangible assets include items like patents, trademarks, and goodwill.

They lack physical form but provide long-term economic benefits.