What Is the Effect on the Balance Sheet When the Business

question 61

Multiple Choice

What is the effect on the balance sheet when the business buys inventory on credit?

• A) increase asset inventory; increase liability creditor
• B) decrease asset inventory; increase liability creditor
• C) decrease asset inventory; decrease liability creditor
• D) increase asset inventory; increase equity

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Definitions:

Sales Mix

The combination of products or services that a company sells, reflecting the variation in profit margins for each.

Annual Fixed Expenses

Costs that do not vary with the level of production or sales over a year, such as rent, insurance, and salaried personnel wages.

Break-Even

The point at which total costs equal total revenue, resulting in neither profit nor loss.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production supplies.