A Major Argument Put Forth by Defenders of the Commission

question 21

Multiple Choice

A major argument put forth by defenders of the commission system is that a commission:

• A) keeps the agencies from placing advertising in expensive media
• B) ties agency compensation to the inflation in media costs
• C) encourages agencies to use noncommissionable media such as direct mail
• D) keeps emphasis on agency competition on non-price factors like advertising quality

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Definitions:

ROCE

Return on Capital Employed, a financial ratio that measures a company's profitability and the efficiency with which its capital is used.

Capital Structure

refers to the mix of debt and equity financing that a company uses to fund its operations and growth.

Financial Leverage

Utilizing borrowed money to amplify the potential gains from an investment, but also elevating the risk of incurring losses.

DFL

Degree of Financial Leverage; a ratio that measures the sensitivity of a company's earnings per share to fluctuations in its operating income, based on its capital structure.