Dropping an Unprofitable Customer Will ________

question 16

Multiple Choice

Dropping an unprofitable customer will ________.

• A) eliminate long-run costs assigned to that customer
• B) eliminate most short-run costs assigned to that customer
• C) decrease long-run profitability
• D) increase the potential to cross-sell other products that are more desirable

---

Definitions:

Interest Rate

The fee, represented as a proportion of the principal, imposed by a lender on a borrower for utilizing assets.

Effective Interest Method

A method of calculating the amortized cost of a bond and the amount of interest expense over time by applying a constant interest rate to the carrying amount of the bond.

Interest Expense

The cost incurred by an entity for borrowed funds, often expressed as an annual percentage rate.

Times Interest Earned Ratio

A financial ratio that measures a company's ability to meet its debt obligations by comparing its interest expense with its earnings before interest and taxes.