If a Firm Cannot Cover Its Variable Costs,it Will

question 138

Multiple Choice

If a firm cannot cover its variable costs,it will

• A)operate in the short run and stay in business in the long run.
• B)operate in the short run and go out of business in the long run.
• C)shut down in the short run and stay in business in the long run.
• D)shut down in the short run and go out of business in the long run.

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Definitions:

Estimated Amount

A projection or approximation of a financial figure often used in budgeting or forecasting.

Allowance Method

A method used in accounting to estimate and account for bad debts, representing the amount of accounts receivable that may not be collected.

Allowance for Doubtful Accounts

A contra asset account that represents the estimated portion of accounts receivable that may not be collectible.

Allowance Method

An accounting technique used to estimate and account for doubtful accounts receivable and adjust the amount of accounts receivable reported on the balance sheet.