Amelia Has a Lot of Business Knowledge and Is Confident

question 123

Multiple Choice

Amelia has a lot of business knowledge and is confident in her abilities to open a successful store. She recently opened a bakery as a sole proprietor. She is expecting a high level of profits and is looking forward to

• A) the lower corporate tax rate paid by sole proprietorships.
• B) keeping all of the money she earns except for the taxes she is required to pay.
• C) keeping all of the money she earns since she does not have to pay taxes as a sole proprietor.
• D) easily raising additional large sums of money from the capital markets since she is a sole proprietor.

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Definitions:

CM Ratio

Contribution margin ratio, showing the portion of sales revenue that is not consumed by variable costs and contributes to covering fixed costs.

Fixed Expenses

Costs that do not fluctuate with the level of production or sales, such as rent, salaries, and insurance premiums.

Units

A measure of quantity for items that are being produced, sold, or inventoried by a company.

Target Profit

The profit a company aims to achieve for a specific period.