Operating Leverage Is the Degree of Dependence a Firm Places

question 47

Multiple Choice

Operating leverage is the degree of dependence a firm places on its:

• A)variable costs.
• B)fixed costs.
• C)sales.
• D)operating cash flows.
• E)net working capital.

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Definitions:

Acid-Test Ratio

A financial metric that assesses a company's ability to pay off its short-term liabilities with its most liquid assets, excluding inventories.

Quick Assets

Assets that can be quickly converted into cash without significantly affecting their value, including cash, marketable securities, and accounts receivable.

Current Assets

Valuables intended to be converted to cash, liquidated, or expended over the course of one year or the operational cycle, whichever timeframe is more extended.

Trade Discount

A reduction in the listed price of a product or service, offered by sellers to buyers in the business-to-business market to encourage purchases in large quantities.