In General, Compared to a Company with No Leverage, a Company

question 62

Multiple Choice

In general, compared to a company with no leverage, a company with high operating leverage will have

• A) Lower operating profits in periods of high sales
• B) No difference in operating profits, regardless of the level of sales
• C) Higher operating profits in periods of high sales

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Definitions:

Privity of Contract

Privity of contract is a legal principle that restricts the rights or duties under a contract to the parties who originally agreed to it, preventing third parties from enforcing the contract terms.

Financial Statement

A formal record of the financial activities and position of a business, individual, or other entity, presented in a structured manner.

Section 11

A provision in the 1933 Securities Act that holds issuers liable for registration statement misrepresentations or omissions of material facts to investors.

Untrue Material Fact

Incorrect or misleading information that is substantial and significant enough to influence a decision-maker's action, particularly in contexts like securities transactions.