A Firm with Cyclical Earnings Is Characterized By

question 38

Multiple Choice

A firm with cyclical earnings is characterized by:

• A) revenue patterns that vary with the business cycle.
• B) high levels of debt in its capital structure.
• C) high fixed costs.
• D) high price per unit.
• E) low contribution margins.

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Definitions:

Economic Life

The expected period over which an asset remains useful to the owner or until it can generate economic benefits.

Artificial Time Periods

Divisions of time, not naturally occurring, created for the purpose of financial reporting, budgeting, or project scheduling.

Economic Entity Assumption

An accounting principle that treats a company as a separate entity from its owners or shareholders for financial reporting purposes.

Economic Events

Transactions and occurrences that have a direct impact on the financial position and performance of a company, including both internal and external activities.