When a Firm Has a High Degree of Operating Leverage

question 81

Multiple Choice

When a firm has a high degree of operating leverage:

• A) Its projected cash flows are known with great certainty.
• B) It is highly susceptible to damage created by forecasting errors.
• C) Its cash flows remain relatively constant regardless of its sales level.
• D) It will have a relatively low level of fixed assets.
• E) It will low fixed costs and high variable costs.

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Definitions:

Core Processes

Core processes are the critical operations or activities within an organization that directly contribute to its ability to create value and achieve its main objectives.

Workflows

The sequence of processes through which a piece of work passes from initiation to completion in a business environment.

Strategic Objectives

Specific, measurable goals that organizations set to guide their strategic plans and actions toward achieving their broader missions and visions.

Process Reengineering

A management strategy focusing on the analysis and design of workflows and processes within an organization to dramatically improve performance.