In a Cost-Volume-Profit Graph, the Dollar Amount by Which Actual

question 117

True/False

In a cost-volume-profit graph, the dollar amount by which actual sales exceed break-even sales volume is called the margin of safety. The margin of safety sales volume times the contribution margin ratio equals operating income.

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Definitions:

Debt Capital

Funds borrowed by businesses to finance their operations or growth, which must be repaid to lenders with interest.

Equity Capital

Funds that are raised by a company in exchange for a share of ownership in the company.

Factoring

A financial transaction where a business sells its accounts receivable to a third party at a discount in exchange for immediate cash.

Trade Credit

An agreement where a buyer is allowed to purchase goods or services and pay the supplier at a later scheduled date.