If the Degree of Operating Leverage Is 4, Then a One

question 176

Multiple Choice

If the degree of operating leverage is 4, then a one percent change in quantity sold should result in a four percent change in:

• A) unit contribution margin.
• B) revenue.
• C) variable expense.
• D) net operating income.

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Definitions:

Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including mutual funds and ETFs.

Unique Risk

Nonmarket or firm-specific risk factors that can be eliminated by diversification. Also called firm-specific risk, nonsystematic risk, or diversifiable risk.

Diversification

Diversification is an investment strategy that aims to reduce risk by allocating investments among various financial instruments, industries, geographic locations, or other categories.

Portfolio

A collection of investments, such as stocks, bonds, commodities, and real estate, held by an individual or an institution.