The Greater the Ratio of Variable Costs to Sales,the

question 18

Multiple Choice

The greater the ratio of variable costs to sales,the:

• A) more each additional sale contributes to the coverage of fixed costs.
• B) lower the level of profitability.
• C) more units that must be sold to cover fixed charges.
• D) lower the benefit of conducting a sensitivity analysis.

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Definitions:

Stock Price

The cost of purchasing a share of a company as quoted on the stock exchange.

Dividend Growth Rate

The annualized percentage rate of growth of a company's dividend payments to its shareholders.

Required Return

The minimum return that an investor expects to receive from an investment to compensate for its risk.

Stock Price

The cost of purchasing a share of a company's stock on the open market.