A Cost Structure Which Relies More Heavily on Fixed Costs

question 28

Multiple Choice

A cost structure which relies more heavily on fixed costs makes the company

• A) more sensitive to changes in sales revenue.
• B) less sensitive to changes in sales revenue.
• C) either more or less sensitive to changes in sales revenue, depending on other factors.
• D) have a lower break-even point.

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Definitions:

Long-Term Liabilities

Long-term liabilities are debts or obligations that are due more than one year in the future, impacting a company's long-term financial sustainability and planning.

Debt-Equity Ratio

The comparative measure of equity and debt in the financing framework for a company's assets.

Dividend Payout Ratio

The percentage of earnings paid to shareholders in dividends, used to measure the extent to which a company returns profits to its shareholders.