-The Degree of Combined Leverage Is
A) 2

question 48

Multiple Choice

$\begin{array}{ll}\text { Sales }(100,000 \text { units) } & \$ 1,000,000 \\\text { Variable costs } & \underline{300.000} \\ \text { Contribution margin } & 700,000 \\ \text { Fixed manufacturing costs } & \underline{250,000} \\ \text { Operating income } & 450,000 \\ \text { Interest } & 60.000 \\ \text { Earnings before taxes } & \overline{390,000} \\\text { Taxes (at } 31 \% \text { ) } & 120.900 \\ \text { Net Income } & \$ 269.100 \\ \text { Shares outstanding } & 10,000 \\\end{array}$
-The Degree of Combined Leverage is

• A) 2.79x.
• B) 1.9x.
• C) 1.79x.
• D) 3.46x.

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Definitions:

Yield Curve

A graph that shows the relationship between interest rates and the maturity of bonds, typically indicating economic expectations.

Marketable Securities

Financial instruments that can be easily converted into cash at a fair value in the short term.

Interest Rate Risk

Interest rate risk is the potential for investment losses due to fluctuations in interest rates, affecting the value of interest-bearing assets like bonds.

Collection Policy

The procedures used by a company to manage and collect accounts receivable, or the money owed by customers.