A 10% Reduction in the Cost of Sales as a Percent

question 11

True/False

A 10% reduction in the cost of sales as a percent of sales will have the same impact on a firm's enterprise and equity values as a 10% increase in revenue.

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Definitions:

Perfect Substitute

Goods that a consumer perceives as identical in utility, meaning the consumer is willing to substitute them for one another at a constant rate.

Utility Function

A mathematical representation that expresses how a consumer's total satisfaction or happiness is influenced by their consumption of different goods and services.

Utility Function

An economic model or formula that reflects the preference, satisfaction, or happiness a consumer obtains from consuming goods and services.

French Fries

A popular food item made by cutting potatoes into strips and deep-frying them until crispy.