Ratio Analysis Is a Useful Managerial Tool That Can Help

question 75

True/False

Ratio analysis is a useful managerial tool that can help business owners maintain financial control over their businesses, but it is of no use to a business owner trying to obtain a bank loan.

---

Definitions:

Sunk Cost

An expense that has been incurred and cannot be recouped.

Manufacturing Costs

The total expense involved in the manufacture of a product, including direct labor, direct materials, and manufacturing overhead.

Scrap Metal

Waste metal material that can be recycled or reused, often collected and sold by businesses or individuals.

Differential Analysis

The process of comparing the costs and benefits of alternative business decisions, focusing on differences in outcomes.