When Evaluating the Liquidity of a Proprietorship,creditors Will Likely Base

question 10

Multiple Choice

When evaluating the liquidity of a proprietorship,creditors will likely base their decision on:

• A)The business ability to generate a profit.
• B)Previous debts of the business.
• C)The financial strength of the owner.
• D)The total assets owned by the business.

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Definitions:

Predetermined Overhead Rate

A rate used to apply manufacturing overhead costs to products, calculated before the production period begins based on estimated costs and activity levels.

Automated Production Line

A manufacturing process involving the use of robotics and computer-controlled equipment to perform a sequence of operations automatically.

Direct Labor-Hours

The total number of labor hours spent by workers directly involved in the production process.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate estimated overhead costs to products or job orders based on a selected activity base.