Which of the Following Intensifies the Business Risk Borne by the Common

question 72

Multiple Choice

Which of the following intensifies the business risk borne by the common stockholders of a firm?

• A) Fixed-income securities
• B) Sales variability
• C) Input price variability
• D) Operating leverage
• E) Firm-specific risk

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Definitions:

Accounts Receivable Period

The typical period a firm takes to collect receivables from its clients.

Cash Cycle

The period between the outlay of cash for raw materials and receiving cash from customer payments, essentially measuring the time it takes for a company to turn its inventory into cash.

Compensating Balance

A minimum account balance that a borrower must maintain in a bank as a condition for obtaining a loan, often used to offset a portion of the bank's lending costs.

Interest Rate

The percentage of an amount of money charged by a lender to a borrower for the use of assets.