All of the Following Statements Are Correct Except

question 81

Multiple Choice

All of the following statements are correct except:

• A)A firm's business risk is measured by its variability in EBIT over time and is affected by several factors, including the business cycle, competitive pressures, and the firm's operating leverage or its level of fixed operating costs.
• B)The degree of financial leverage measures the sensitivity of earnings per share to changes in EBIT.
• C)The degree of combined leverage is the percentage change in gross profit that results from a 1 percent change in sales volume.
• D)The degree of combined leverage is simply the product of its degree of operating leverage and its degree of financial leverage.
• E)All of the above statements are correct.

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Definitions:

More Elastic

Describes demand that is highly sensitive to changes in price, where consumers significantly alter their quantity demanded with slight price variations.

Price-Discriminating Firm

A company that engages in the practice of charging different prices for the same product in different markets or segments.

Elastic Demand

Refers to a situation where the quantity demanded of a good or service significantly changes in response to a change in price.

Inelastic Demand

A situation where the demand for a good or service is not significantly changed by alterations in its price.