If a Firm's Fixed Costs Are Exactly Equal to Its

question 78

Multiple Choice

If a firm's fixed costs are exactly equal to its depreciation expense, and both are greater than zero, then at its cash break-even point the DOL ______________.

• A) Is equal to one.
• B) Is equal to two.
• C) Is greater than two.
• D) Is undefined since you can't divide by zero.
• E) Cannot be determined without more information.

---

Definitions:

Capital Leases Payable

The liability account that records the present value of future lease payments for assets obtained through capital leases.

Unearned Revenues

Money received by a company for goods or services yet to be delivered or performed.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health of the business.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or the business cycle, whichever is longer.