Ralph Is in Charge of a Project That Has a Degree

question 403

Multiple Choice

Ralph is in charge of a project that has a degree of operating leverage of 2.5. What will happen to the operating cash flows if Ralph increases the number of units sold by 5 percent?

• A) increase by 2 percent
• B) increase by 12.5 percent
• C) increase by 50 percent
• D) decrease by 12.5 percent
• E) decrease by 50 percent

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Definitions:

State Taxes

State taxes are financial charges imposed by individual states on income, property, sales, and other activities, varying widely between different states.

Local Taxes

Taxes imposed by local governments, such as cities or counties, which can include property taxes, sales taxes, and income taxes.

W-2

The form that an employer must send to an employee and the IRS at the end of the year, which reports the employee's annual wages and taxes withheld.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period of time, resulting in net profit or loss.