If a Large Proportion of Costs Is Fixed,a Shortfall in Sales

question 31

True/False

If a large proportion of costs is fixed,a shortfall in sales has a magnified effect on profits.From the previous statement we know that the risk of a project is affected by the degree of operating leverage.

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Definitions:

Superego

A component of Freud's psychoanalytic theory, representing the moralistic part of the mind that incorporates social standards and ideals.

Ego-ideal

A component of the psyche that represents an individual's standards of perfection and aspirations.

Reality Principle

A psychoanalytic concept where the ego seeks to satisfy the id’s desires in realistic and socially appropriate ways.

Primary-process Thought

A mode of thinking primarily in the unconscious mind involving the fulfillment of wishes and desires, often irrational and without logical coherence.