You Are Looking at the Bottom of a Lake 1

question 22

Multiple Choice

You are looking at the bottom of a lake 1.2 m deep from a boat. To you the lake seems to be

• A) less than 1.2 m deep.
• B) 1.2 m deep.
• C) more than 1.2 m deep.
• D) Any of these choices could be correct, depending on the height of the sun.

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Definitions:

Operating Leverage

A financial ratio that measures the degree to which a firm or project can increase operating income by increasing revenue.

Operating Income

The income earned from a company's day-to-day operations, calculated before taking into account interest and taxes.

Margin Of Safety

The difference between actual sales and break-even sales, providing a cushion against which sales can fall before a business incurs a loss.

Break-Even Point

The level of sales or production at which total revenues equal total expenses, resulting in no profit or loss for the business.