New Fixed Costs Incurred to Relax a Constraint Are Irrelevant

question 193

True/False

New fixed costs incurred to relax a constraint are irrelevant.

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Definitions:

Dividend Payout Ratio

A financial metric that shows what percentage of a company's earnings are distributed to shareholders as dividends.

Additional Debt

Borrowing more funds in addition to existing debt, which can increase a company's leverage and financial risk.

Operating Capacity

The maximum output that a company can produce under normal conditions within a given period using its existing resources.

Dividend Payout Ratio

A financial metric that shows the percentage of a company's earnings paid out to shareholders as dividends.