The Relationship Between Current Assets and Current Liabilities Is Important

question 63

Multiple Choice

The relationship between current assets and current liabilities is important in evaluating a company's

• A) profitability.
• B) liquidity.
• C) market value.
• D) accounting cycle.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or with volume of services provided.

Fixed Costs

Fixed costs are expenses that do not vary with the level of production or sales within a certain range, such as rent, salaries, and insurance.

Automated Machine

A machine operated with minimal human intervention, typically using computer-controlled systems.

Margin of Safety

The difference between actual or projected sales and the break-even point, indicating the extent to which sales can drop before a business incurs a loss.