Answer: net profit margin.

## Explanation An impairment loss on equipment affects both the income statement and balance sheet: **Impact on Financial Ratios:** 1. **Net Profit Margin** (Net Income ÷ Revenue): - Impairment loss reduces net income (expense on income statement) - Revenue remains unchanged - Therefore, net profit margin decreases 2. **Total Asset Turnover** (Revenue ÷ Average Total Assets): - Impairment reduces the carrying value of equipment (asset side of balance sheet) - Revenue remains unchanged - Denominator (total assets) decreases, so total asset turnover actually **increases** 3. **Working Capital Turnover** (Revenue ÷ Average Working Capital): - Working capital = Current Assets - Current Liabilities - Equipment is a non-current asset, not part of working capital - Therefore, working capital turnover is unaffected **Conclusion:** The impairment loss will most likely decrease net profit margin because it reduces net income without affecting revenue, while total asset turnover would increase due to lower asset base, and working capital turnover remains unchanged. **Key Concept:** Impairment losses are non-cash expenses that reduce both net income and the carrying value of assets, affecting profitability ratios negatively but potentially improving efficiency ratios that use asset values in the denominator.

Author: LeetQuiz .