Which of the Following Is a Good Reason for a Company

question 92

Multiple Choice

Which of the following is a good reason for a company to have higher than average debt ratios?

• A) The company's cash flows are difficult to predict.
• B) The company generates little taxable income.
• C) Customer support is an important aspect of the company's business.
• D) The company faces high marginal tax rates.

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Definitions:

Variable Costing

An accounting method that only includes variable production costs—material, labor, and overhead—in product cost calculations, excluding fixed costs.

Fixed Manufacturing Overhead

The sum of all production costs that do not change with the level of output, including salaries, rent, and utility expenses of a manufacturing facility.

Absorption Costing

An accounting method that includes both variable and fixed manufacturing overhead costs in the cost of producing goods.

Segmented Income Statement

A segmented income statement breaks down the financial performance of different segments of a business, such as departments or product lines, to analyze each segment's profitability.