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:

Principal

The main party to a transaction, contract, or financial instrument, or the amount of a debt or investment before interest.

Interest

The cost of borrowing money, typically expressed as an annual percentage of the principal, or the profit earned on savings and investments.

Negotiable Instrument

A written document guaranteeing the payment of a specific amount of money, either on demand or at a set time, with the payee able to transfer it to another holder.

Good Contract

An agreement that is valid under the law and contains all the essential elements making it enforceable and binding.