Why Is It not a Good Idea to Rely on Your

question 11

Multiple Choice

Why is it not a good idea to rely on your income statement to run your business?

• A) The income statement records cash when it comes into the business.
• B) The income statement adds non-cash expenses back to the business's earnings.
• C) The income statement deducts non-cash expenses, such as depreciation, even when no cash is actually flowing out of the business.
• D) The income statement usually contains errors that other statements don't have.

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Definitions:

Law of Diminishing Marginal Utility

An economic principle stating that as consumption of a good or service increases, the marginal utility derived from each additional unit decreases.

Marginal Utility

Marginal Utility is the added satisfaction or benefit a consumer receives from consuming one more unit of a good or service.

Diminishing Marginal Utility

The principle that the utility or satisfaction gained by consuming each additional unit of a good or service decreases as more of that good or service is consumed.

Marginal Utility

The extra pleasure or benefit derived from consuming an additional unit of a product or service.