Industry Structures Are Not Stable Over Time

question 56

Multiple Choice

Industry structures are not stable over time.The U.S.banking industry has seen major consolidation in recent years.We would expect the result of this dynamic change to be what?

• A) Generally lower industry profits.
• B) It will have no effect on profitability.
• C) Further erosion in business.
• D) Generally higher industry profits.

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Definitions:

Operating Cash Flow

A measure of the cash generated by a company's normal business operations.

DOL

Degree of Operating Leverage, a ratio that measures how a company's operating income changes with a change in sales, indicating the effects of fixed costs on profits.

Accounting Break-Even

The point at which total revenues equal total expenses, and the business does not make a profit or loss.

Depreciation

A financial approach that spreads the price of a tangible asset over the period it is expected to benefit the company.