If a Business-Type Activity Is Subsidized by a Government's General

question 39

True/False

If a business-type activity is subsidized by a government's General Fund rather than fully covering its costs of providing services with fees or charges, that activity need not be reported in an enterprise fund.

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Definitions:

Degree of Operating Leverage

A ratio that measures the effect of a change in sales on operating income by analyzing fixed versus variable costs.

Sales Increase

The rise in the amount of goods or services sold over a specific period, indicating business growth.

Net Operating Income

Measures the profit a company generates from its core business operations, excluding expenses related to interest and taxes.

Selling Price

The price at which a product or service is sold to customers.