When a Firm Establishes a Long-Term Contract with Another Firm

question 16

Multiple Choice

When a firm establishes a long-term contract with another firm that is characterized by common ownership of a supplier with another firm, this is a:

• A) standard supply contract.
• B) joint venture.
• C) lease contract.
• D) franchise agreement.

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Definitions:

Net Income

Net income is the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.

Depreciation

The process of allocating the cost of a tangible asset over its useful life.

Net Income After Taxes

The profit a company retains after all operating expenses, interest, taxes, and preferred stock dividends have been deducted from total revenue.

Operating Costs

Operating costs are expenses associated with the maintenance and administration of a business on a day-to-day basis.