Compared to companies that have a cost structure that is mainly comprised of variable costs, companies with a cost :structure that is mainly comprised of fixed costs would Have limited ability to enhance their profits at a higher degree a O Have low operating leverage b O Be less vulnerable to adverse effects of economic downturn cO Be considered more risky d O

Compared to companies that have a cost structure that is mainly comprised of variable costs, companies with a cost :structure that is mainly comprised of fixed costs would Have limited ability to enhance their profits at a higher degree a O Have low operating leverage b O Be less vulnerable to adverse effects of economic downturn cO Be considered more risky d O

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter13: Capital Structure And Leverage

Section: Chapter Questions

Problem 2Q: Would each of the following increase, decrease, or have an indeterminant effect on a firms...

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Compared to companies that have a cost structure that is mainly comprised of fixed costs, companies with a cost structure that is mainly comprised of variable costs would: O a. Be vulnerable to adverse effects of economic downturn O b. Have low operating leverage Oc. Be able to enhance their profits at a higher degree on O d. Be considered more risky
If XYZ Company sells unit outputs that exceed the breakeven point, a. there will be an increase in total fixed costs b. total sales revenue will exceed total variable costs total sales revenue will exceed total fixed costs dthere will be a profit e None of the given answers
?Which of the following statements about operating leverage is false The degree of operating leverage is higher for companies with higher fixed costs .a O .Keeping all factors constant, the higher the contribution margin, the higher the operating leverage .b O 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 .c O All of the given answer's are true d O Operating leverage measures how operating income will be affected by changes in sales .e O
All other things the same, which of the following would be true of the contribution margin and variable costs of a company with high fixed costs and low variable costs as compared to a company with low fixed costs and high variable costs? Contribution Margin Variable Costs A. Higher Higher B. Lower Higher C. Higher Lower D. Lower Lower Option A Option B Option C Option D
Which of the following costs are always incremental and relevant in decision analysis? a) Opportunity costs and sunk costs b) Avoidable costs and opportunity costs c) Only avoidable costs d) Avoidable costs and sunk costs Which of the following will increase a company's breakeven point? a) reducing its total fixed costs b) increasing the selling price per unit c) increasing variable cost per unit d) increasing contribution margin per unit
Which of the following items will not cause the company's ROA to increase? Multiple Choice O O Reducing costs. Reducing company assets without impacting sales. Increasing company assets. Increasing the selling price per unit. $
Which of the following statements is/are true regarding the impact of a company's cost structure? Cost structure can have a significant impact on a company's profitability By outsourcing production, companies generally reduce fixed costs, which will impact their cost structure A higher contribution margin ratio indicates a larger reliance on fixed costs relative to variable costs Companies with a greater reliance on variable costs will have a higher margin of safety ratio All of the above statements are true
IA Cost is divided by the change in units. CLEAR MY CHOICE 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 than another company with low degree of operating leverage. O b. Operating leverage measures how operating income will be affected by changes in sales O C. All of the given answers are true. O d. The degree of operating leverage is higher for companies with higher fixed costs O e. Keeping all factors constant, the higher the contribution margin, the lower the operating leverage. NEXT PAG GE ere to search
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.
Which of the following is a disadvantage of outsourcing? A. freeing up capacity B. freeing up capital C. transferring production and technology risks D. limiting ability to upsize or downsize production
A company accepts incremental business at a special price that exceeds the variable cost. What other issues must the company consider in deciding whether to accept the business?
In a cost-volume-profit analysis, explain what happens at the break-even point and why companies do not want to remain at the break-even point.