​Which of the Following Is the Effect of Impaired Goodwill

question 39

Multiple Choice

​Which of the following is the effect of impaired goodwill on liquidity and profitability metrics?

• A) ​Both profitability and liquidity will remain unaffected.
• B) ​Both profitability and liquidity will decrease.
• C) ​Profitability will increase, whereas liquidity will remain unaffected.
• D) ​Liquidity will decrease, whereas profitability will increase.

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Definitions:

Variable Costs

Costs that change in proportion to the level of production or business activity.

Saltwater Taffy

A variety of soft taffy originally produced and marketed in coastal areas, known for its unique texture and array of flavors.

Marginal Cost

The additional cost incurred from producing one more unit of a good or service.

Diminishing Returns

A principle stating that as more of a variable input is added to fixed inputs, the additional output gained from each new unit of input eventually decreases.