Finance for Non-Finance Managers Basic Finance 4

Question 1

A product sells for $100 and has variable costs of $60 per unit. What is the contribution margin per unit?

Accepted Answer

$40

Answer

Contribution margin = Selling Price − Variable Cost = $100 − $60 = $40 per unit.

Question 2

Net income differs from operating income because net income also subtracts:

Accepted Answer

Interest expense and income taxes

Answer

Net income = Operating income − Interest expense − Taxes, reflecting the 'bottom line' after all obligations.

Question 3

A company has $2M in total debt and $4M in total equity. Its debt-to-equity ratio is:

Accepted Answer

0.5

Answer

Debt-to-equity ratio = Total Debt / Total Equity = $2M / $4M = 0.5.

Question 4

Accounts receivable on the balance sheet represents:

Accepted Answer

Money customers owe the company for completed sales

Answer

Accounts receivable is a current asset — amounts billed to customers for goods/services delivered but not yet paid.

Question 5

Break-even analysis helps managers determine:

Accepted Answer

The sales volume at which revenue equals total costs

Answer

Break-even analysis finds the output level where total revenue equals total costs, resulting in zero profit or loss.

Finance for Non-Finance Managers Practice Test