A Firm Stands to Gain by Operating Instead of Shutting

question 184

Multiple Choice

A firm stands to gain by operating instead of shutting down as long as ________ sufficiently covers ________.

• A) price; average variable cost
• B) price; average fixed cost
• C) total revenue; total fixed costs
• D) operating profit; economic profit

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Definitions:

Operating Profit

The profit from business operations before deducting interest and taxes, indicative of the core profitability of business activities.

Operating Segments

Components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assess performance.

Generating Revenue

This term refers to the process by which a business earns income through the sale of goods, provision of services, or other financial operations.

Financial Reporting System

A structured process or framework used by an entity to compile and present financial data in the form of financial statements.