Which of the Following Is NOT a Correct Statement Regarding

question 137

Multiple Choice

Which of the following is NOT a correct statement regarding break-even?

• A) Accounting break-even is the sales level that results in zero project net income.
• B) The cash break-even is the sales level that results in zero OCF.
• C) The financial break-even is the sales level that results in zero NPV.
• D) If there is depreciation the cash break-even will exceed the accounting break-even.
• E) Of the three break-evens, the financial break-even point is typically the highest.

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Definitions:

Restrictive Covenant

A clause in a contract which restricts the actions of parties to the contract for the benefit of other parties to the contract or to protect the value of a related asset.

Inventory Loan

A secured short-term loan to purchase inventory.

Cash Disbursement

The payment of money from a fund or account, typically involving the transfer of cash to individuals or companies for services rendered or goods purchased.

Operating Cycle

The period from purchasing inventory to collecting cash from the sale of that inventory.