Which of the Following Affects a Firm's Sensitivity of Its

question 50

Multiple Choice

Which of the following affects a firm's sensitivity of its earnings to the business cycle?
I. Financial leverage
II. Operating leverage
III. Type of product

• A) II only
• B) I and II only
• C) I and III only
• D) I, II, and III

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Definitions:

Pension Plan

A retirement plan that requires an employer to make contributions into a pool of funds set aside for a worker's future benefit.

IRA Contribution

Money placed into an individual retirement account (IRA) that may qualify for tax deductions or other tax advantages.

AGI

Adjusted Gross Income; a determinant of tax liability calculated by adjusting gross income for certain allowable deductions.

Qualified Pension Plan

A retirement plan that meets the requirements set by the Internal Revenue Code, thereby offering tax benefits such as tax-deferred growth on earnings and deductible contributions for the employer.