The Main Difference Between the Current Assets on the Balance

question 276

Multiple Choice

The main difference between the current assets on the balance sheet of a service company and a manufacturer is that a manufacturer has

• A)inventory and a service company does not.
• B)cost of goods sold and a service company does not.
• C)accounts receivable and a service company does not.
• D)accounts payable and a service company does not.

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Definitions:

Sales

The total amount of revenue a company generates from the sale of goods or services before any expenses are deducted.

Margin of Safety

The difference between actual or expected sales and the break-even point, reflecting the cushion against a loss.

Break Even

Break even refers to the point at which total costs and total revenue are equal, resulting in no net loss or gain and the initial investment is recovered.

Fixed Costs

Expenses that do not change with the volume of production or sales, such as rent, salaries, and insurance, remaining constant regardless of business activity levels.