If Fixed Lease Payments Are Reduced and Everything Else Remains

question 29

Multiple Choice

If fixed lease payments are reduced and everything else remains constant,

• A) times interest earned goes up.
• B) fixed charge coverage goes up.
• C) fixed charge coverage stays the same.
• D) debt to total assets goes down.

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Definitions:

Economic Profits

Profits exceeding the opportunity costs of a company; considered an indicator of efficiency and entrepreneurship.

Average Total Cost

The total cost of production divided by the total quantity of goods produced, representing the cost per unit.

Average Variable Cost

The cost of labor and materials divided by the quantity of output produced, reflecting costs that change with the level of output.

Average Total Cost

The total cost of production divided by the quantity of output produced; it includes both fixed and variable costs.