While Profit Margin Is the Appropriate Measure of Value for Short-Term

question 30

True/False

While profit margin is the appropriate measure of value for short-term decisions, contribution margin is the appropriate measure for long-term decisions.

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Definitions:

Operating Cash Flows

Cash generated from a company's normal business operations, indicating its ability to generate enough cash to maintain or expand operations.

Sunk Cost

Expenses that have been paid and cannot be retrieved, and therefore, should not impact upcoming business strategies.

Opportunity Cost

The benefit foregone by choosing one alternative over another.

Financing Costs

Expenses incurred by an entity in borrowing funds, including interest, fees, and other charges associated with the issuance of debt.