A Common Measure of Profitability Is the

question 232

Multiple Choice

A common measure of profitability is the

• A) current ratio.
• B) times interest earned.
• C) return on common stockholders' equity.
• D) debt to assets.

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Definitions:

Variable Costing

The concept that considers the cost of products manufactured to be composed only of those manufacturing costs that increase or decrease as the volume of production rises or falls (direct materials, direct labor, and variable factory overhead).

Absorption Costing

An accounting method that includes all of the manufacturing costs in the cost of a product, including direct materials, direct labor, and both variable and fixed manufacturing overhead.

Margin of Safety

The difference between actual or projected sales and the break-even sales level, used to assess risk.

Volume of Sales

Volume of sales refers to the total number of units sold over a specific period, indicating the quantity of business conducted.