If a Company Reports a Net Loss It

question 16

Multiple Choice

If a company reports a net loss it

• A) may still have a net increase in cash.
• B) will not be able to pay cash dividends.
• C) will not be able to get a loan.
• D) will not be able to make capital expenditures.

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Definitions:

Net Income

The total profit of a company after all expenses, taxes and costs have been subtracted from total revenue.

Variable Manufacturing Costs

Costs that vary directly with the level of production output, such as raw materials and direct labor.

Break-Even Point

The point at which total revenues equal total costs, meaning no profit or loss is incurred.

Fixed Costs

Expenses that do not change in proportion with the activity of a business, such as rent, salaries, and insurance.