When a Company Receives Customers' Checks by Mail

question 16

Multiple Choice

When a company receives customers' checks by mail:

• A)the mailroom sends all customer checks to the treasurer,who has the cashier deposit the checks in the bank.
• B)the treasurer prepares the journal entries.
• C)the mailroom employee prepares the journal entries.
• D)the cashier in the treasury department prepares the journal entries.

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Definitions:

Operating Leverage

Operating leverage refers to the degree to which a company or project can increase operating income by increasing revenue.

Total Leverage

The combination of operating leverage (affecting operating income) and financial leverage (affecting net income), indicating total risk.

Financial Leverage

The use of borrowed funds to finance the acquisition of assets, with the expectation that the profits made will be greater than the interest payable.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from revenues.