Cash refers to the most liquid funds a company can use right away to settle obligations. It includes currency and coins on hand and amounts in bank accounts that can be withdrawn on demand, such as checking or savings account balances. In practice, it also covers cash equivalents—short-term, highly liquid investments that can be quickly converted to known amounts of cash with little risk of loss. Because these near-cash items function like cash in terms of liquidity, they are reported together as cash and cash equivalents on the balance sheet. That’s why the best answer includes both cash and cash equivalents. The other options pick out only part of what qualifies as cash and cash-like assets: cash on hand misses on-demand deposits, bank deposits alone misses cash on hand, and cash equivalents alone misses actual cash.

Expenses are the costs a business incurs to earn its revenue, reflecting the resources consumed in providing goods or services. This includes materials, labor, overhead, and even non-cash items like depreciation that are recognized as costs in the income statement. Because expenses represent the use of resources to generate income, they reduce net income and equity. That’s why the description of expenses as the costs of providing goods and services is the best fit. It isn’t an increase in equity, which would imply a gain or inflow rather than a cost. It also isn’t limited to cash outflows, since some expenses (like depreciation) do not involve an immediate cash payment. And while taxes paid are a type of expense, they’re just one category among many expenses.

DuPont analysis breaks ROE into three distinct drivers: profitability, efficiency, and leverage. Net Profit Margin shows how much profit the company keeps from each dollar of sales, Asset Turnover measures how effectively assets generate sales, and the Leverage Multiplier (Equity Multiplier) reflects how financial leverage increases returns on shareholders’ equity. When you multiply these three components together, you get ROE: Net Profit Margin × Asset Turnover × Leverage Multiplier. If you expanded it, you’d have Net Income / Revenue × Revenue / Average Total Assets × Average Total Assets / Average Shareholders’ Equity, which simplifies back to Net Income / Average Shareholders’ Equity (ROE). The expression that combines all three drivers is the correct DuPont form. The other options either omit a driver or represent a different metric (for example, Net Income divided by Average Total Assets is ROA, not ROE, and doesn’t show the leverage effect).

When a new accounting principle is mandated, the transition method is dictated by the guidance in the applicable standard. Those transition rules often require retrospective application to restate prior periods presented so that financial statements are comparable under the new principle. However, if it is impracticable to determine the effects of the change for prior periods, the standard typically allows or requires applying the change prospectively from the adoption date. Because the appropriate method depends on the specific transition provisions and the practicality of reconstructing prior data, mandated changes can be implemented using either retrospective or prospective approaches. The key idea is to use retrospective restatement when feasible to maintain comparability, and switch to prospective from the adoption point if retroactive restatement is impracticable.