When a Firm Is Said to Have No Spare Capacity

question 55

Multiple Choice

When a firm is said to have no spare capacity, it:

• A) has no need for new employees.
• B) currently has no inventory available for sale.
• C) must issue new equity to grow.
• D)must increase fixed assets to increase sales.

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Definitions:

GAAS

Stands for Generally Accepted Auditing Standards, which are the guidelines auditors follow to ensure their audits are conducted objectively and consistently.

Privity or Near-Privity Rule

A legal principle requiring a close, direct relationship between the parties involved in a contract for a third party to have the right to sue.

Third Party Liability

Legal responsibility that arises when a third party is held liable for damages or injury caused to another, often seen in insurance contexts.

Unaudited

Referring to financial statements or accounts that have not undergone formal examination and verification by an auditor.