Which One of the Following Accounting Identities Is True

question 405

Multiple Choice

Which one of the following accounting identities is true?

• A) Disposable personal income plus indirect business taxes equals personal income.
• B) Disposable personal income plus non-income expense items equals personal income.
• C) Disposable personal income plus personal income taxes equals personal income.
• D) National income plus profit equals personal income.

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Definitions:

Operating Leverage

A metric assessing the impact of increased sales on operational earnings, revealing the balance between a firm's fixed and variable expenses.

EBIT

Earnings Before Interest and Taxes, a measure of a company's profitability that excludes interest and income tax expenses to show the business's core profitability.

DOL

Department of Labor, a U.S. government department responsible for occupational safety, wage standards, unemployment insurance benefits, re-employment services, and some economic statistics.

Financial Leverage

The use of debt to increase the potential return of an investment.