An Increase in the Current Ratio Implies That the Profitability

question 153

True/False

An increase in the current ratio implies that the profitability of the company has increased from the previous period.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs of a product or service, used to cover fixed costs and generate profit.

Fixed Manufacturing Overhead

The set costs associated with operating a manufacturing facility that do not vary with the level of production, including salaries of managers and depreciation of equipment.

Unit Product Cost

The total cost (both fixed and variable) associated with producing a single unit of a product.

Additional Contribution Margin

The increase in contribution margin generated by an additional unit of sales, reflecting the revenue minus variable costs for that unit.