The Percentage of Completion Profit for a Particular Project of Redgate

question 25

Multiple Choice

The percentage of completion profit for a particular project of Redgate Ltd was $200 000 for year 1 and $220 000 for year 2 (completion) .
-What difference would there be in profit for year 1 if the completion of production method were used?

• A) Profit would be $200 000 higher.
• B) Profit would be $200 000 lower.
• C) There would be no difference.
• D) It cannot be determined from the above information.

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Definitions:

Capital Markets

Financial markets where debt or equity-backed securities are traded, facilitating the raising of capital by companies and governments.

EBIT-EPS Analysis

A study conducted to determine the impact of debt on a company's earnings before interest and taxes (EBIT) and its earnings per share (EPS).

Leverage

The employ of various financial instruments or borrowed capital, like debt, to increase the potential return of an investment.

Degree of Financial Leverage

A measure that assesses the sensitivity of a company's earnings per share to fluctuations in its operating income, based on its use of fixed-cost financing.