Net Income Decreases Stockholders' Equity While a Net Loss Increases

question 68

True/False

Net income decreases stockholders' equity while a net loss increases stockholders' equity.

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Definitions:

Contribution Margin

The difference between a company's sales revenue and variable costs, which contributes to covering its fixed costs and generating profit.

Variable Cost

Expenses that change in proportion to the amount of goods produced or the volume of services provided.

Variable Costing

A costing approach in which only variable manufacturing costs are product costs, and fixed manufacturing costs are period costs (expenses).

Absorption Costing

A costing approach in which all manufacturing costs are charged to the product.