If the Forecasted Sales Level Is Not Met, Which of the Following

question 48

Multiple Choice

If the forecasted sales level is not met, which of the following will lead to a lower than expected addition to retained earnings?

• A) A decrease in production facilities
• B) An increase in fixed charges on external financing
• C) Assets being turned over quickly
• D) A significant increase in income
• E) Inventories being built up quickly

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Definitions:

GAAP

Generally Accepted Accounting Principles, a framework of accounting standards, rules, and procedures used in the compilation of financial statements in the US.

Lease Capitalization Criteria

The standards or requirements used to determine whether a lease should be recorded as an asset and liability on the balance sheet.

Operating Leases

Leasing agreements where the lessor retains ownership of the asset, and the lessee pays for the right to use the asset for a specific period without gaining ownership.

Off-Balance Sheet Financing

Off-balance sheet financing involves raising funds or incurring liabilities that are not recorded on the company's balance sheet, often to improve financial ratios.