Which of the Following Statements Is CORRECT

question 43

Multiple Choice

Which of the following statements is CORRECT?

• A) The factors that affect a firm's business risk are affected by industry characteristics and economic conditions.Unfortunately, these factors are generally beyond the control of the firm's management.
• B) One of the benefits to a firm of being at or near its target capital structure is that this eliminates any risk of bankruptcy.
• C) A firm's financial risk can be minimized by diversification.
• D) The amount of debt in its capital structure can under no circumstances affect a company's business risk.
• E) A firm's business risk is determined solely by the financial characteristics of its industry.

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Definitions:

Direct Materials

Raw materials that can be directly traced to the manufacturing of a product in terms of quantity and cost.

Direct Labor

Employees who are directly involved in the production of goods or services.

Job Lot

A batch of goods produced based on a specific customer order, differing in quantity or specifications from other batches.

Production Process

The sequence of operations that transforms raw materials or components into finished goods or services.