The Margin of Safety Ratio Is

question 34

Multiple Choice

The margin of safety ratio is

• A) expected sales divided by break-even sales.
• B) expected sales less break-even sales.
• C) margin of safety in dollars divided by expected sales.
• D) margin of safety in dollars divided by break-even sales.

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Definitions:

Factoring Transaction

A financial transaction where a business sells its accounts receivable to a third party (the factor) at a discount.

Total Assets

The sum of all assets owned by an entity, as recorded on the balance sheet, representing the resources controlled by the entity.

Adjusting Entry

An accounting journal entry made at the end of an accounting period to allocate income and expenditures to the appropriate period, ensuring compliance with the accrual basis of accounting.

Allowances for Doubtful Accounts

A contra-asset account that reduces the total amount of accounts receivable to reflect the portion that is estimated not to be collected.