As Applied to the Balance Sheet Statement, Which of the Statements

question 66

Multiple Choice

As applied to the balance sheet statement, which of the statements below is FALSE?

• A) The company looks at the prior year's balance sheet and finds each line's percentage of total assets.
• B) The company forecasts the coming year's total assets based on expected changes such as the completion of capital projects, desired levels of certain accounts such as cash and inventories, and additional borrowing for dividend purposes.
• C) If a large capital project will be completed in the coming year and the Plant, Property and Equipment line will grow significantly, its percentage of total assets should increase.
• D) Financing a capital project may require additional debt financing, causing the percentage of long-term debt to rise above its prior year's percentage of total assets.

Calculate and understand the significance of operating leverage in predicting changes in operating income.

Determine the variable and fixed costs from given data, and understand their impact on the company’s profitability.

Understand and calculate the contribution margin and its role in assessing a company’s profitability.

Analyze the impact of changes in sales volume on operating income.

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Definitions:

Risky Shift

In group decision making, the tendency for decisions made in groups after discussion to be riskier than decisions made by individual members prior to discussion.

Risk Avoidant

Characterizes individuals or strategies that prioritize minimizing potential losses or risks.

Justice Principle

The ethical concept that emphasizes fairness and the equitable treatment of individuals in decision-making processes and distribution of resources.

Profits

The financial gain obtained when the revenue generated from business activities exceeds the expenses, costs, and taxes needed to sustain the activity.