Financial Deficits Are Created When

question 49

Multiple Choice

Financial deficits are created when:

• A)profits and retained earnings are greater than the capital-spending requirement.
• B)profits and retained earnings are less than the capital-spending requirement.
• C)profits and retained earnings are equal to the capital-spending requirement.
• D)All of the above.
• E)None of the above.

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Definitions:

Net Operating Income

Profit derived from a company's operations after all operating expenses have been deducted from total revenue.

Unit Sold

The total quantity of units of a product that have been sold in a given period.

Contribution Margin Ratio

The contribution margin ratio measures the proportion of revenue remaining after variable costs are deducted, indicating the percentage of sales that contributes to fixed costs and profit.

Fixed Monthly Expenses

Expenses that do not change in total regardless of the level of activity, production, or sales within a given month.