The Statement About the Uses of Budgets That Is Not

question 16

Multiple Choice

The statement about the uses of budgets that is not true is:

• A) They can assist in identifying short-term problems.
• B) They are mainly used to set prices.
• C) They can provide a system of authorisation for managers to spend up to a particular limit.
• D) None of the above, i.e. all are true statements.

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Definitions:

Times Interest Earned Ratio

A financial ratio that measures a company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.

Earnings Before Interest and Taxes

A measure of a firm's profit that includes all expenses except interest and income tax expenses.

Cash Coverage Ratio

A liquidity metric that measures a company's ability to pay off its debt with its cash flow, demonstrating financial health.

Days' Sales In Inventory

A measure of how efficiently a company manages its inventory, calculated by dividing the inventory by the daily average cost of goods sold.