A Firm Can Minimize Its Losses by Shutting Down When

question 362

Multiple Choice

A firm can minimize its losses by shutting down when ________ are less than ________ costs.

• A) variable costs; fixed
• B) fixed costs; variable
• C) revenues; variable
• D) operating profits; sunk

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Definitions:

Expenses

The cost of assets consumed or services used in the process of generating revenues.

Accounts Receivable

Money owed to a business by its customers for products or services delivered on credit.

Net Income

The total profit of a company after all revenues, cost of sales, operating expenses, and taxes have been subtracted from its total revenue.

Operating Activities

Activities that relate to the primary operations of a company, such as selling goods and services, which are reflected in the cash flow statement.