Which One of the Following Statements Is True Concerning Operating

question 127

Multiple Choice

Which one of the following statements is true concerning operating leverage?

• A) The higher the degree of operating leverage, the greater the impact of forecasting risk.
• B) Firms with low operating leverage are said to be capital intensive.
• C) The degree of operating leverage is equal to [1 + (OCF/FC)].
• D) The degree of operating leverage is equal to the percent change in quantity divided by the percent change in operating cash flow.
• E) Operating leverage increases as the output quantity rises.

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Definitions:

Interest Rate

The proportion, typically expressed as a percentage, at which interest is charged on a loan or paid on savings.

Like Terms

Terms that have the same variables raised to the same power, which can be combined by adding or subtracting the coefficients.

Parentheses

Parentheses are symbols used in mathematics to group terms or to indicate the order of operations.

Annual Sales

The total value of all sales transactions completed by a business over the course of a year.