Match Each of the Following Items with the Appropriate Description

question 133

Multiple Choice

Match each of the following items with the appropriate description, indicating whether the item increases or decreases the parent's basis in the stock of a subsidiary.
-Member's operating gains/profits.

• A)Increases stock basis of subsidiary
• B)Decreases stock basis of subsidiary
• C)No effect on stock basis of subsidiary

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Definitions:

Fixed Expenses

Costs that do not change in total despite changes in the level of business activity or production volume, such as rent or salaries.

Target Net Profit

A financial objective set by a business indicating the desired bottom-line income after all expenses, interest, and taxes have been deducted from total revenues.

Degree of Operating Leverage

A measure of how much a company's operating income changes in response to a change in sales volume, indicating the level of fixed versus variable costs.

Contribution Margin

The amount remaining from sales revenue after all variable expenses have been deducted, indicating the ability to cover fixed costs and generate profit.