Which of the Following Is True Regarding Management's Discussion and Analysis

question 22

Multiple Choice

Which of the following is true regarding Management's Discussion and Analysis (MD&A) ?

• A) MD&A should provide an objective analysis of the financial activities based on currently known facts, decisions, or conditions.
• B) MD&A should disclose total assets and liabilities for all substantial component units.
• C) Management should provide a cash flow projection for at least three consecutive fiscal years in MD&A.
• D) MD&A is optional for city governments.
• E) MD&A is the final element of the introductory section of the comprehensive annual financial report (CAFR).

---

Definitions:

Contribution Margin Ratio

A ratio that measures the percentage of sales revenue remaining after deducting variable costs, indicating the portion of sales available to cover fixed costs and generate profit.

Variable Expense Ratio

A ratio computed by dividing variable expenses by sales.

Break-even Analysis

A calculation to determine the sales volume at which total revenues equal total costs, indicating no profit or loss.

Contribution Margin Ratios

The ratio of contribution margin (sales minus variable costs) to sales revenue, indicating the percentage of sales revenue that exceeds variable costs.