Firms Can Manage Their Degree of Operating Leverage by Converting

question 146

True/False

Firms can manage their degree of operating leverage by converting variable costs into fixed costs, or vice versa.

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Definitions:

Discount Factor

A number used to calculate the present value of future cash flows; it reflects the time value of money.

Operating Costs

Expenses involved in the day-to-day functions of a business related to its operations, potentially including both cost of goods sold and operating expenses.

Salvage Value

The estimated resell value of an asset at the end of its useful life.

Discount Rate

The interest rate used to discount future cash flows to their present value, often in the context of investment appraisal or determining the net present value.