The Phrase "Ordinary and Necessary" Means That an Expense Must

question 92

True/False

The phrase "ordinary and necessary" means that an expense must be appropriate and helpful for generating a profit.

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Definitions:

Quick Ratio

A financial metric that measures a company's ability to meet short-term obligations with its most liquid assets, excluding inventory.

Evaluation Of Liquidity

The process of assessing a company's ability to meet its short-term obligations using its current assets.

Current Obligations

Debts or financial commitments that are due to be settled within one year or within the normal operating cycle of the business.

Times Interest Earned Ratio

Operating income divided by interest expense.