Going Public Is Not Recommended for Companies with Less Than

question 53

Multiple Choice

Going public is not recommended for companies with less than $________ million in sales because the initial costs can be too high for the firm to generate sufficient cash flow to make going public worthwhile.

• A) 100
• B) 1
• C) 20
• D) 5
• E) 10

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Definitions:

Manufacturing Overhead

Indirect factory-related costs that are incurred when a product is manufactured, including costs for management, equipment maintenance, and factory utilities.

Direct Labor Cost

This cost includes wages and benefits paid to employees who are directly involved in producing goods or providing services.

Product Costs

Expenses directly associated with the production of goods, including materials, labor, and overhead costs.

Period Costs

Expenses that are not directly tied to production and are expensed on the income statement in the period they are incurred, such as selling and administrative expenses.