Which of the Following Would Be Considered an Acceptable Penny-Pinching

question 56

Multiple Choice

Which of the following would be considered an acceptable penny-pinching strategy?

• A)offer company equity instead of paying employees up front
• B)never offer discounts on the sale of your product or service
• C)never outsource tasks
• D)don't pay vendors until the business is successful

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Definitions:

Financial Leverage

Utilizing borrowed capital to amplify the possible returns on an investment.

Operating Leverage

An indicator of the degree to which sales growth affects operational profit, showing the ratio of a company's fixed costs compared to its variable costs.

Interest Expense

The cost incurred by an entity for borrowed funds, often reported on the income statement.

Fixed Operating Costs

Fixed operating costs refer to expenses that do not change in proportion to business activity levels, such as rent, salaries, and insurance premiums.