For Which of the Following Reasons Would a Business Prefer

question 10

Multiple Choice

For which of the following reasons would a business prefer to own space rather than lease it?

• A) The business demands specialized or unique facilities
• B) Owning allows the business to develop skills in operating, maintaining, and repair real estate and the associated facilities
• C) Owning reduces operating flexibility
• D) The capital commitments with owning are lower than the capital commitments associated with leasing
• E) All of the above are reasons a business would prefer to own space rather than lease it

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Definitions:

Net Present Value

The disparity between cash inflows' present value and cash outflows' present value through a certain time frame, utilized to determine an investment's profitability.

Fixed Costs

Costs that do not change with the level of output or sales, such as rent, salaries, and insurance premiums.

Cash Break-even Point

The point at which a business's cash inflows equal its cash outflows, excluding financing.

Degree of Operating Leverage

A ratio that quantifies the sensitivity of a company's operating income to its sales, demonstrating the impact of fixed and variable costs on profitability.