Financial Ratios Can Help You to Ask the Right Questions

question 22

True/False

Financial ratios can help you to ask the right questions but they rarely answer these questions on their own.

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Definitions:

Evaluate Possible Courses

The process of examining and considering all potential actions to determine the best course of action.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to fixed costs and profits.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.

Incremental Basis

A method of calculating changes in costs or benefits that result from small variations in the quantity of output or input.