A Reduction in the Sales of Existing Products Caused by the Introduction

question 33

Multiple Choice

A reduction in the sales of existing products caused by the introduction of a new product is an example of

• A)incidental effects.
• B)opportunity costs.
• C)sunk costs.
• D)allocated overhead costs.

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Definitions:

Breakeven Analysis

A financial calculation to determine the point at which revenue and expenses are equal, resulting in no net loss or gain.

Financial Leverage

The use of borrowed funds to finance the purchase of assets with the expectation that the income or capital gain from the new assets will exceed the cost of borrowing.

EBIT

A measure of a firm's profit that disregards expenses from interest and income taxes, termed as Earnings Before Interest and Taxes.

ROE

Return on Equity, a financial ratio indicating the profitability of a business in relation to its equity, measuring how effectively investment funds are utilized.