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Why Is the Capacity Decision Important

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Why is the capacity decision important?


Definitions:

Degree of Financial Leverage

A ratio indicating the degree to which a company uses borrowed funds to finance its operations, affecting potential returns and risk.

EPS

Earnings per share, a key indicator that calculates the portion of a company's profit allocated to each outstanding share of common stock.

Tax Deduction

An expense that a taxpayer is allowed to deduct from taxable income, thereby reducing the overall tax liability.

Financial Leverage

The use of borrowed money (debt) to amplify the potential return of an investment.

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