A Has a Higher Degree of Business Risk Than Firm

question 12

True/False

A has a higher degree of business risk than Firm B Firm A can offset this by using less financial leverage Therefore, the variability of both firms' expected EBITs could actually be identical.

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Definitions:

Variable Cost

Costs that vary directly with the level of production or service activity.

Contribution Margin

The difference between the sales revenue of a product and its variable costs.

Machine Time

The scheduled or actual time that a machine is set to operate or is operating, usually relating to production processes.

Total Cost Concept

An approach in accounting that considers all costs related to the production of a product, including direct, indirect, fixed, and variable costs.