Which of the Following Differentiates Accounting Operating Profit Break-Even Point

question 75

Multiple Choice

Which of the following differentiates accounting operating profit break-even point from pre-tax operating cash flow break-even point?

• A) Accounting operating profit break-even point includes interest expense in the numerator, whereas pre-tax operating cash flow does not.
• B) Pre-tax operating cash flow break-even point includes income taxes in the denominator, whereas accounting operating profit break-even point does not.
• C) Accounting operating profit break-even point includes depreciation & amortization in the numerator, whereas pre-tax operating cash flow does not.
• D) Pre-tax operating cash flow break-even point includes interest expense in the numerator, whereas accounting operating profit break-even point does not.

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Definitions:

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return.

Current Consumption

The portion of income or resources that is spent on goods and services at the present time, as opposed to saving for future consumption.

Budget Line

A graphical representation of all possible combinations of two goods that can be purchased at given prices and within a given budget.

Interest Rate

The percentage at which interest is paid by borrowers for the use of money that they borrow from a lender.