Which of the following is an overall measure of the performance of a business entity's activities?

• A. Accounts Payable
• B. Net Sales
• C. Inventory Turnover
• D. Depreciation Expense

Answer: (B)

Verified step by step guidance

1. Understand the question: The problem is asking for an overall measure of the performance of a business entity's activities. This requires identifying which term best reflects the financial results of the entity's operations.
2. Analyze the options: Review each term provided in the question and determine its relevance to measuring overall performance. For example, 'Accounts Payable' refers to liabilities owed to suppliers, which is not a performance measure. 'Inventory Turnover' measures efficiency in managing inventory, but it is not an overall performance metric. 'Depreciation Expense' reflects the allocation of asset costs over time, which is an expense but not a direct measure of overall performance.
3. Focus on 'Net Sales': Net Sales represents the total revenue generated from sales after deducting returns, allowances, and discounts. It is a key indicator of the business's ability to generate income and is often used as a measure of overall performance.
4. Relate Net Sales to performance: Net Sales is directly tied to the success of the business's core activities, such as selling goods or services. Higher Net Sales generally indicate better performance, assuming costs are managed effectively.
5. Conclude the reasoning: Based on the analysis, 'Net Sales' is the correct answer because it provides a comprehensive view of the business's ability to generate revenue, which is a fundamental measure of performance.