You Can Use the Liquidity Ratio to Determine the Number

question 85

True/False

You can use the liquidity ratio to determine the number of months that you could continue to meet your expenses using only your monetary assets should all income cease.

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Definitions:

Break-Even Point

The volume of production or sales at which total revenues equal total expenses, with no profit or loss.

Variable Expense Per Unit

The cost that varies with each unit produced or sold, affecting the company's total variable expenses directly.

Total Contribution Margin

The difference between total sales revenue and total variable costs, indicating how much revenue is available to cover fixed costs and generate profit.

Contribution Format

An income statement format that differentiates between fixed and variable costs, highlighting the contribution margin.