Which One of the Following Statements Is Correct

question 37

Multiple Choice

Which one of the following statements is correct?

• A)At the accounting break-even level,the pretax profit is equal to the aftertax profit.
• B)The contribution margin is equal to sales minus fixed costs.
• C)Taxes are considered when computing the accounting break-even point but not the financial break-even point.
• D)The larger the contribution margin,the higher the financial break-even point.
• E)The accounting break-even point is higher than the financial break-even point for the same project.

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Definitions:

Days' Sales

Days' Sales, often referred to as Days Sales Outstanding (DSO), measures the average number of days it takes a company to collect payment after a sale has been made.

Receivables Turnover

A financial metric that measures how efficiently a company uses its assets by converting accounts receivable into cash over a period.

Debt-Equity Ratio

A financial ratio that represents the comparative deployment of shareholders' equity and debt in asset financing.

Total Asset Turnover

A financial metric indicating how efficiently a company uses its assets to generate sales revenue.