Which of the following statements about operating leverage is false? O a. If the degree of operating leverage higher for a company, this means that the company is more risky t another company with low degree of operating leverage. O b. Keeping all factors constant, the higher the contribution margin, the lower the operating leverage. O c. Operating leverage measures how operating income will be affected by changes in sales d. All of the given answers are true. The degree of onerating leverage is higher for companies with higher fived costs = here to search O 耳 PE の hp fo 10 $4 4 & 7 V #3 3 6. 6.

Which of the following statements about operating leverage is false? O a. If the degree of operating leverage higher for a company, this means that the company is more risky t another company with low degree of operating leverage. O b. Keeping all factors constant, the higher the contribution margin, the lower the operating leverage. O c. Operating leverage measures how operating income will be affected by changes in sales d. All of the given answers are true. The degree of onerating leverage is higher for companies with higher fived costs = here to search O 耳 PE の hp fo 10 $4 4 & 7 V #3 3 6. 6.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 44MCQ: When a Dupont analysis reveals that a company has much higher than average asset turnover and much...

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Which of the following statements about operating leverage is false? a. Operating leverage measures how operating income will be affected by changes in sales b. The degree of operating leverage is higher for companies with lower fixed costs c. Keeping all factors constant, the higher the contribution margin, the higher the operating leverage. d. All of the given answers are true. e. If the degree of operating leverage higher for a company, this means that the company is more risky than another company with low degree of operating leverage.
If company A has a higher degree of operating leverage than company B, then: company A is more profitable. company A has higher variable expenses. company A is less risky. company A's profits are more sensitive to percentage changes in sales.
Which of the following statements about operating leverage is NOT true? Group of answer choices Operating leverage predicts the effect of fixed costs on operating income when sales volume changes. A higher proportion of fixed cost in a cost structure results in higher operating leverage. The higher the operating leverage, the higher the risk of loss when sales volume decreases. A higher proportion of fixed cost in a cost structure results in lower operating leverage.
If a firm is using financial leverage successfully, the ROE should be a. higher than the profit margin b. higher than ROA c. lower than if no leverage were used d. higher than if no leverage were used
Which of the following statements is true? A In linear break-even analysis, the contribution margin is the difference between the selling price and the average fixed cost. B The Theory of the Business Firm assumes perfect market competition. This means it assumes that the selling price decreases as a firm's production rate increases. C In the Theory of the Business Firm, profits per period are maximized at the production rate at which marginal cost equals average cost. D In the Theory of the Business Firm, profits per period are maximized at the production rate at which average cost is minimized. E All four statements are false.
true or false The smaller the contribution margin ratio, the larger the amount of sales required to cover a given amount of fixed expenses True False The margin of safety can be defined as the amount by which profit can decrease before losses are incurred by the company True False A big increase in sales will result in a small increase in profit if there is a low degree of operating leverage in a company True False
The amount by which a company's sales can decline before losses are incurred is called the:degree of operating leverage.margin of safety.profit loss.contribution margin ratio.
Which of the following situations is most likely to pose a problem for companies that use return on investment as a measure of a manager’s performance? a. Managers may be encouraged to purchase more operating assets than they otherwise should. b. Managers may be discouraged from purchasing operating assets that could improve overall profitability. c. Managers may be discouraged from reducing their division’s costs. d. Managers may be discouraged from paying off debt in order to reduce costs
Firms with a high degree of operating leverage: will have a more significant shift in income as sales volume changes have lower fixed costs have low contribution margin ratio are less dependent on volume to add profits
Which of the following statements is most accurate? A. Financial leverage is directly related to operating leverage. B. Increasing the corporate tax rate will not affect capital structure decisions. C. A firm with low operating leverage has a small proportion of its total costs in fixed costs. D. Total costs can be calculated as net income minus total revenue.
If a firm's marginal revenue is smaller than its marginal cost, then the firm should collect additional information before taking any action. increase output to increase profit. keep output the same decrease output to increase profit.
Which of the following statement(s) is/are not true? i. Return On Investment (ROI) as a performance measure may discourage managers of divisions with high ROIs to invest in projects with lower ROIs that are acceptable to the organization as a whole. ii. ROI incorporates the firm’s opportunity cost of acquiring investment capital. iii. Under Residual Income (RI), rates of return can be adjusted to take into account differences in risks for different investment assets. iv. Both ROI and RI use a percentage measure. v. ROIs cannot be used to compare divisions of differing sizes. Multiple Choice ii, iv and v ii, iii and iv i, ii and iii i and ii i only