In a graphic breakeven analysis, the point where total revenue is less than total cost indicates that the firm has:
A)net operating capital
B)cash flow from investing
C)a negative EBIT
D)a positive return on capital

Question

Quizplus · Accepted Answer

When total revenue is less than total cost, it means that the firm is not generating enough sales to cover all of its expenses, including operating expenses and financing costs. This results in a negative earnings before interest and taxes (EBIT), which is a measure of the firm's operating profitability. Therefore, the best choice is C - a negative EBIT. Choices A, B, and D do not accurately describe the situation when total revenue is less than total cost.

In a Graphic Breakeven Analysis, the Point Where Total Revenue