From the Following Choices, Select the Answer That Describes the Effect

question 185

Multiple Choice

From the following choices, select the answer that describes the effect on working capital as a result of the transaction.
-Borrowed cash using a long-term note

• A)Working capital will increase
• B)Working capital will decrease
• C)Working capital will not change

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Definitions:

Break-even Point

The level of sales at which total revenues equal total expenses, resulting in no net profit or loss.

Variable Cost

Expenses that change in proportion with the level of activity or production volume, such as materials costs or sales commissions.

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business over a certain period, such as rent, salaries, and loan payments.

High-low Method

A technique in managerial accounting used to estimate variable and fixed costs by analyzing the highest and lowest levels of activity.