A Sunk Cost Is One That

question 304

Multiple Choice

A sunk cost is one that

• A)changes as the level of output changes in the short run.
• B)was paid in the past and will not change regardless of the present decision.
• C)should determine the rational course of action in the future.
• D)has the most impact on profit-making decisions.

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Definitions:

Bankruptcy

A legal process through which individuals or businesses unable to meet their outstanding debts seek relief from some or all of their liabilities.

Legal Proceeding

A series of steps taken to resolve a legal issue, including lawsuits, hearings, and other actions involving the judicial system.

Capital Restructuring

The process of reorganizing a company's capital structure, possibly involving changing the mix between debt and equity financing.

Debt-equity Ratio

An analysis ratio that shows how a company’s assets are financed through a combination of equity and debt.