Which of the Following Statements Is Not True

question 56

Multiple Choice

Which of the following statements is not true?

• A) Operating leverage refers to the extent to which a company's net income reacts to a given change in sales.
• B) Companies that have higher fixed costs relative to variable costs have higher operating leverage.
• C) When a company's sales revenue is increasing, high operating leverage is good because it means that profits will increase rapidly.
• D) When a company's sales revenue is decreasing, high operating leverage is good because it means that profits will decrease at a slower pace than revenues decrease.

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Definitions:

Enterprise

A business or company, especially one that's large and complex, engaged in commercial or professional activities.

Financial Statements

Reports that provide an overview of a company's financial condition, including balance sheets, income statements, and cash flow statements.

Marketing Function

The role within a company involved with identifying and meeting the needs and wants of customers through product development, pricing, promotion, and distribution.

Generating Demand

Generating Demand involves creating interest or desire for a product or service through marketing strategies, initiatives, and activities, aiming to increase sales and market presence.