TR Industries Manage a Product with a 2

question 420

Multiple Choice

TR Industries manage a product with a 2.6 degree of operating leverage. Sales of the product are expected to decline by 8 percent next year as an economic downturn is anticipated. What is the
Expected change in the operating cash flow for this product for next year?

• A) -20.8 percent
• B) -5.4 percent
• C) 5.4 percent
• D) 10.8 percent
• E) 20.8 percent

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Definitions:

Encumbrance System

A system used in accounting to reserve portions of appropriated funds to avoid overspending, primarily used by governments.

Estimated Commitments

Obligations or contracts that a company is likely to incur in the future based on past or planned activities.

Journal Entry

A record in accounting that represents the recording of a financial transaction in a journal.

Restricted Funds

Funds that are constrained by external parties or legislation for specific purposes and cannot be freely used for any other expenditures.