The Margin of Safety Would Be Negative If a Company('s)

question 87

Multiple Choice

The margin of safety would be negative if a company('s)

• A)was presently operating at a volume that is below the break-even point.
• B)present fixed costs were less than its contribution margin.
• C)variable costs exceeded its fixed costs.
• D)degree of operating leverage is greater than 100.

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Definitions:

Accounts Receivable Turnover

Accounts receivable turnover is a financial ratio that measures how many times a business can collect its average accounts receivable during a period, indicating the efficiency of credit and collection activities.