The Ability of a Firm to Pass on Cost Increases

question 69

Multiple Choice

The ability of a firm to pass on cost increases to its customers or revenue decreases to its suppliers is known as:

• A)a natural hedge.
• B)vertical integration.
• C)adverse selection.
• D)operating insurance.
• E)supply management.

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Definitions:

Accrued Interest

Interest that has accrued but remains unpaid.

Bonds Purchased

An investment in debt securities issued by corporations or governments, representing a portion of the borrowing and entitling the holder to interest payments.

Equity Method

An accounting technique used to record investments in other companies, where the investment is significant but not controlling, typically 20-50% ownership.

Outstanding Stock

The total number of shares of a corporation's stock that are currently owned by all shareholders, including share blocks held by institutional investors and restricted shares.