If Sales Remain the Same and the Margin of Safety

question 19

Multiple Choice

If sales remain the same and the margin of safety increases, which of the following is true?

• A) The break-even point has decreased.
• B) The common fixed costs have increased.
• C) The break-even point has remained constant.
• D) Variable costs have increased.

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Definitions:

Paid-In Capital

The amount of money that a company has received from shareholders in exchange for stock, exceeding the par value of the shares.

Common Stock

A type of equity security that represents ownership in a corporation and entitles holders to vote on corporate matters and receive dividends.

Stated Value

The value assigned to no-par stock by the company's board of directors, used as the basis for accounting transactions.

No-Par

Refers to stocks issued without a par value, which means they do not have a nominal or face value.