Which One of the Following Principles Refers to the Assumption

question 9

Multiple Choice

Which one of the following principles refers to the assumption that a project will be evaluated based on its incremental cash flows?

• A)Forecast assumption principle
• B)Base assumption principle
• C)Fallacy principle
• D)Erosion principle
• E)Stand-alone principle

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Definitions:

Break-Even Point

The point at which total costs and total revenue are equal, meaning the business is neither making a profit nor a loss.

Sales Mix

The combination of different products or services that a company sells, influencing overall sales volume, revenues, and profits.

Break-Even Point

The level of production or sales at which total costs equal total revenue, resulting in zero profit or loss.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the percentage of fixed versus variable costs a company has.