Firm a Employs a High Degree of Operating Leverage; Firm

question 21

Multiple Choice

Firm A employs a high degree of operating leverage; Firm B takes a more conservative approach. Which of the following comparative statements about firms A and B is true?

• A)A has a lower break-even point than B, but A's profit grows faster after the breakeven.
• B)A has a higher break-even point than B, but A's profit grows slower after the breakeven.
• C)B has a lower break-even point than A, but A's profit grows faster after the breakeven.
• D)B has a lower break-even point than A, and profit grows the same rate for both companies after the break-even point.

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Definitions:

Estate

The collective assets, rights, and interests that a person owns at death, encompassing both real property and personal property.

Trust Instrument

A legal document that creates a trust, specifying the terms, trustees, beneficiaries, and purpose.

Trust's Purpose

The specific objectives or intentions for which a trust is established, guiding how the trust's assets are to be managed and used.

Constructive Trust

An equitable remedy resembling a trust, imposed by a court in order to benefit a party that has been unjustly enriched at another's expense, even though no actual trust has been created by the parties.