A Key Consideration in the Holding Company Decision Is

question 6

Multiple Choice

A key consideration in the holding company decision is

• A) the risk from the separate "companies" in the holding company being classed as one company.
• B) the risk-return tradeoff due to the leverage effect.
• C) the greater "distance" between top level and operating management.
• D) the risk of the domino effect if one company in the holding company fails.

---

Definitions:

Variable Costing

An accounting method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of goods sold.

Absorption Costing

A system of accounting that encompasses the full range of manufacturing costs—direct materials, direct labor, and overheads both variable and fixed, within the cost framework of a product.

Break-even Sales

The amount of revenue required to cover total fixed and variable costs, resulting in a net profit of zero.

Eastern Division

A geographical or operational segment of a larger organization designated to cover the eastern part of a country or area.