Which of the Following Equations Represents a Simple and Effective

question 32

Multiple Choice

Which of the following equations represents a simple and effective way to think about anticipated external funding?

• A)External funds required = assets - liabilities - equity
• B)External funds required = assets + liabilities - equity
• C)External funds required = assets + liabilities + equity
• D)External funds required = assets - liabilities + equity

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Definitions:

Contribution Margin Ratio

The percentage of each sales dollar that is available to cover the fixed costs and provide an operating income. Also called profit-volume ratio.

Contribution Margin

The income left over after subtracting variable expenses, which is utilized to pay for fixed costs and create earnings.

Sales

Sales refer to the transactions where goods or services are exchanged for money, contributing to a company's revenue.

Sales Mix

The relative distribution of sales among a company’s various products. Also referred to as product mix.