Donald and Sons Manage a Product with a 3

question 317

Multiple Choice

Donald and Sons manage a product with a 3.0 degree of operating leverage. Sales of the product are expected to increase by 10 percent next year. What is the expected change in the operating
Cash flow for this product for next year?

• A) 3.3 percent increase
• B) 10 percent increase
• C) 30 percent increase
• D) 10 percent decrease
• E) 30 percent decrease

---

Definitions:

Investors

Individuals or entities that allocate capital with the expectation of receiving financial returns.

Board of Directors

Members selected by the corporation's shareholders to govern and decide on important matters concerning the company's administration.

Chief Executive Officer

The highest-ranking executive in a company, responsible for making major corporate decisions, managing overall operations, and acting as the main point of communication between the board of directors and corporate operations.

Corporation

A legal entity that is separate and distinct from its owners, capable of conducting business, owning property, and being liable for legal actions.