When Using the Payback Method Payback Is Expressed in Terms

question 139

Multiple Choice

When using the payback method payback is expressed in terms of

• A) a percent.
• B) dollars.
• C) time.
• D) a discount factor.

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Definitions:

Degree of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to its sales volume, indicating how a change in sales will affect profits.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been subtracted from total revenue.

Contribution Margin Ratio

The percentage of sales that exceeds variable production costs, indicating how much of each sales dollar is available to cover fixed costs and generate profit.

Variable Expenses

Expenses that vary directly with changes in business activities or production levels, similar to variable costs, including items like shipping fees and sales commissions.