Which One of the Following Statements Is True If a Firm

question 193

Multiple Choice

Which one of the following statements is true if a firm is operating at less than full capacity?

• A) The EFN computed using the straight percentage method will be understated.
• B) The EFN computed using the straight percentage method will be accurate.
• C) The EFN computed using the percentage of sales approach will be understated.
• D) The EFN computed using the percentage of sales approach will be accurate.
• E) The EFN computed using the percentage of sales approach will be overstated.

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Definitions:

Net Working Capital

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

Opportunity Costs

This refers to the potential benefits an individual, investor, or business misses out on when choosing one alternative over another.

Inventory

The complete inventory of products and materials owned by a business, intended for either production or selling.

Net Working Capital

The disparity between a firm's existing assets and its immediate liabilities, showing the company's short-term fiscal stability and efficiency in operations.