Suppose That Milo Left a Job, Where He Earned a Salary

question 87

Multiple Choice

Suppose that Milo left a job, where he earned a salary of $50,000 per year, in order to open an all-natural soap business. His insurance cost is $5,000; his material cost is $25,000; his lease payments are $10,000; and his revenue is $90,000. Milo's accounting profit is

• A) $50,000.
• B) $90,000.
• C) $40,000.
• D) $0.

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Definitions:

Current Liabilities

Obligations or debts due for payment within one year.

Current Ratio

A financial ratio indicating how well a company can settle short-term debts with its available assets.

Total Assets

The total of all properties a company owns, encompassing both short-term and long-term assets.

Liquidity

The ability of an asset to be converted into cash quickly without significantly affecting its price.