If the Shape of the Curve Depicting a Firm's WACC

question 51

True/False

If the shape of the curve depicting a firm's WACC versus its debt ratio is more like a sharp "V", as opposed to a shallow "U", it will be easier for the firm to maintain a steady dividend in the face of varying investment opportunities or earnings from year to year.

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Definitions:

Break-Even Point

The financial state where total costs equal total revenues, meaning the business is not making a profit, but it's not losing money either.

Total Fixed Costs

The sum of all business expenses that remain constant regardless of production volume, such as rent, salaries, and insurance.

Variable Costs

Expenses that change in proportion to the activity of a business.

Economic Order Quantity

Orders replacements whenever inventory level falls to a predetermined point.