Use the Information Below to Answer the Following Question(s)

question 232

Multiple Choice

Use the information below to answer the following question(s) :
Westfall Watches has two product lines: Luxury watches and Sporty watches. Income statement data for the most recent year follow:

-Assuming fixed costs remain unchanged, how would discontinuing the Sporty line affect operating income?

• A) Increase in total operating income of $49,000
• B) Increase in total operating income of $142,000
• C) Decrease in total operating income of $10,000
• D) Decrease in total operating income of $108,000

---

Definitions:

Debt-Equity Ratio

A ratio that delineates how company assets are proportionally funded through equity and debt.

Plug Figure

A number inserted into a financial calculation or model to make the numbers balance, often representing missing or estimated data.

Financial Plan

A comprehensive overview of an individual's current financial situation, goals, and strategies to achieve those goals.

External Financing

Funds raised from sources outside the company, such as investors or lenders.