Assume That the Annual Demand Is 10,000 Units and the Order

question 16

Multiple Choice

Assume that the annual demand is 10,000 units and the order quantity per order is 1,000 units,then ______.

• A)there are 10 orders during the year
• B)there is one order placed as soon as existing inventory is consumed
• C)there is one order placed at the end of each month
• D)this is an indicator that this is not a lean operation

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Definitions:

Financial Distress Costs

Expenses that a company faces when it is having difficulty meeting its financial obligations, which can include legal, restructuring, and operational costs.

Debt-equity Ratio

The ratio highlighting the financial mix of equity and debt used in the acquisition of company assets.

Break-even Level

The juncture where overall expenses match the total income, leading to neither a net profit nor a loss.

M&M Theory

Modigliani and Miller's theory positing that in an ideal market, a company's value is unaffected by how it is financed, whether through debt or equity.