A Managerial Preference for a Very Low Degree of Operating

question 65

Multiple Choice

A managerial preference for a very low degree of operating leverage might indicate that

• A)an increase in sales volume is expected.
• B)a decrease in sales volume is expected.
• C)the firm is very unprofitable.
• D)the firm has very high fixed costs.

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Definitions:

Perceived Budget Line

The subjective view of the combination of goods and services that a consumer can purchase with their available resources, based on their perception of their budget.

Steeper Slope

Indicates a larger change in the y-value or dependent variable for a given change in the x-value or independent variable on a graph.

Investor

An individual or entity that allocates capital with the expectation of receiving financial returns.

Standard Deviation

Square root of the weighted average of the squares of the deviations of the payoffs associated with each outcome from their expected values.