Often Cited Reasons for Using Off-Balance-Sheet Financing Include That This

question 54

Multiple Choice

Often cited reasons for using off-balance-sheet financing include that this accounting technique

• A)lowers the cost of borrowing and is inexpensive.
• B)lowers the cost of borrowing because borrowers already provide the correct information for reporting purposes.
• C)lowers the cost of borrowing and avoids violation of debt covenants.
• D)simplifies contracts and improves cash flows.
• E)simplifies contracts and lowers the cost of borrowing.

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Definitions:

Direct Labor

Direct labor refers to the wages paid to employees who are directly involved in the production of goods or services.

Direct Materials

Raw materials that are directly consumed in the manufacturing process of a product and are easily traceable to it.

Cost of Goods Manufactured

The total expense incurred by a company to produce goods in a specific period, including labor, material, and overhead costs.

Total Manufacturing Costs

The sum of all expenses directly involved in the production of goods, including materials, labor, and overhead.