The Margin of Safety Would Be Negative If a Company('s)

question 87

Multiple Choice

The margin of safety would be negative if a company('s)

• A)was presently operating at a volume that is below the break-even point.
• B)present fixed costs were less than its contribution margin.
• C)variable costs exceeded its fixed costs.
• D)degree of operating leverage is greater than 100.

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Definitions:

Personal Loans

Unsecured loans given to individuals based on their credit history and income, rather than requiring collateral.

Effective Rate

The interest rate on a loan or financial product, restated from the nominal rate as an annual rate accounting for compound interest.

Interest Charged

The cost of borrowing money, calculated as a percentage of the principal amount on a loan or credit.

Semiannual Compounding

Interest calculation method where the interest is added to the principal twice a year, leading to compound interest growth.