The Existing Balance in Allowance for Doubtful Accounts Is Considered

question 116

Multiple Choice

The existing balance in Allowance for Doubtful Accounts is considered in computing bad debt expense in the

• A) direct write-off method.
• B) percentage of receivables basis.
• C) percentage of sales basis.
• D) percentage of receivables and percentage of sales basis.

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Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the proportion of fixed versus variable costs a company has.

Safety Margin

The difference between the actual sales and the break-even point; it measures the amount by which sales can drop before a business incurs a loss.

Automated Firm

An enterprise that employs advanced technologies and systems such as artificial intelligence, robotics, and sophisticated software to minimize human intervention in its operations.

Break-Even Sales Volume

The quantity of products sold or services provided at which total revenues equal total costs, resulting in no profit or loss.