If a High Percentage of a Firm's Operating Costs Are

question 37

Multiple Choice

If a high percentage of a firm's operating costs are fixed and hence do not decline when demand falls off, this will _____.

• A) decrease financial leverage
• B) optimize the capital structure of the firm
• C) increase the business risk of the firm
• D) decrease the firm-specific risk of the firm
• E) intensify the risk borne by thefirm's common stockholders

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Definitions:

Top Levels Of Management

The highest tier in an organization's management structure, typically including roles like CEO, CFO, and other senior executives responsible for strategic decisions.

Master Budget

A comprehensive financial plan that includes detailed financial statements, forecasts, and budgets, consolidating all aspects of an organization’s financial performance.

Flexible Budget

A flexible budget that adapts to variations in activity or volume levels, enhancing the precision of budgeting and analysis of differences.

Indirect Materials

Supplies used in the production process that are not directly part of the final product, such as lubricants for machines.