The "Cash Flow Test" for the Payment of Dividends and Other

question 15

Multiple Choice

The "cash flow test" for the payment of dividends and other distributions is also known as the:

• A) equity insolvency test.
• B) balance sheet test.
• C) surplus test.
• D) net assets test.

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Definitions:

Total Contribution Margin

The amount left over from sales revenue after variable expenses have been deducted; it contributes to covering fixed costs and generating profit.

Fixed Costs

Charges that stay the same no matter the scale of production or sales, like rent, salaries, and insurance.

Variable Costs

Expenses that vary depending on the amount of products or services a company generates.

Mixed Cost

A cost that contains both variable and fixed cost elements, changing in total with changes in activity level but not in the same proportion.