Illinois Tool Company's (ITC)fixed Operating Costs Are $1,260,000 and Its

question 41

Multiple Choice

Illinois Tool Company's (ITC) fixed operating costs are $1,260,000 and its variable cost ratio (i.e., variable costs as a fraction of sales) is 0.70. The firm's debt consists of a $6,000,000 bond issue (par value) which pays a coupon rate of 9%. Sales are $9 million per year. What is ITC's degree of financial leverage?

• A)1.20
• B)1.875
• C)3.0
• D)1.60

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Definitions:

Sociological Imagination

The ability to see the relationship between individual experiences and the larger society, emphasizing the connection between personal issues and broader social structures.

C. Wright Mills

An American sociologist known for his work on the structure of power in American society and for coining the term "sociological imagination."

Sociologists

Scholars who study society and social behavior by examining the groups, cultures, organizations, social institutions, and processes that develop when people interact and work together.

Society

Represents a group of individuals involved in persistent social interaction, or a large social group sharing the same geographical or social territory, typically subject to the same political authority and dominant cultural expectations.