Non-Operating Items Will Generally Reduce a Company's Quality of Earnings

question 114

True/False

Non-operating items will generally reduce a company's quality of earnings.

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Definitions:

Contribution Format

A format for the income statement that divides variable costs from fixed costs to emphasize the contribution margin.

Fixed Expenses

Costs that do not vary with the level of output or sales, such as rent and salaries.

High-low Method

A technique used in accounting and finance to estimate variable and fixed costs based on the highest and lowest levels of activity.

Monthly Fixed Component

The portion of fixed costs, such as rent or salaries, that does not change with the volume of production or sales in a given month.