A Decrease in the Current Asset to Total Asset Ratio

question 153

Multiple Choice

A decrease in the current asset to total asset ratio has the effects of__________on profits and_________on risk.

• A) an increase; a decrease
• B) a decrease; a decrease
• C) an increase; an increase
• D) a decrease; an increase

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Definitions:

Fixed Costs

Expenses that remain constant regardless of the level of production or sales activity, such as rent, salaries, and insurance premiums.

Variable Service Department Costs

Expenses in a service department that fluctuate in direct proportion to changes in the level of service activity or volume.

Budgeted Rate

A predetermined rate, often used for allocating costs or resources in a budget based on estimated expenditures.

Actual Activity

The real, measured amount of work performed or the level of production achieved over a specified period of time.