Using the Percent of Sales Method and Assuming That No

question 37

Multiple Choice

Using the percent of sales method and assuming that no excess capacity exists,a 20% increase in sales will result in

• A) a 20% increase in total assets.
• B) a 20% increase in total liabilities.
• C) a 20% increase in retained earnings.
• D) a 20% increase in the company's profit margin.

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Definitions:

Indemnity

The concept that distinguishes a contract of insurance from a wager.

Utmost Good Faith

A principle of insurance contracts that requires all parties to act honestly and not mislead or withhold critical information from one another.

Insurable Interest

An interest that would result in a loss on the occurrence of the event.

Insurance Policy

A contract between an insurer and policyholder specifying the claims the insurer is legally required to pay.