The Various Causes That Increase the Chances of Business Failures

question 6

True/False

The various causes that increase the chances of business failures are current ratio of 1.33, solvency ratio of greater than 20%, and rapid decrease in days' sales outstanding.

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Definitions:

Marginal Cost

The change in total cost that arises when the quantity produced is incremented by one unit.

Total Variable Cost

The sum of all costs that vary with output level, including costs of labor, materials, and other inputs that change with the level of production.

Average Variable Cost

The variable cost per unit of output, computed by dividing total variable costs by the quantity of output produced.

Total Fixed Costs

The overall total of expenditures that remain steady, unaffected by how much is produced or outputted.