ACME,IncReported the Following Income Statement for 2009: If ACME's

question 36

Multiple Choice

ACME,Inc.reported the following income statement for 2009: If ACME's sales next year increase by 20%,ACME's EBIT will increase

• A)20%,showing no operating leverage.
• B)20%,showing no financial leverage.
• C)over 35%,due to operating leverage.
• D)over 35%,due to operating leverage and financial leverage.

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Definitions:

Profit Maximization

The procedure through which a business identifies the pricing and production volume that yields the highest earnings.

Market Price

The price at which a good or service is offered in the marketplace.

Profit Maximization

A rephrased definition: The strategy or aim of a firm to achieve the highest profit possible, usually by adjusting outputs, prices, or production costs.

Market Price

The current price at which an asset or service can be bought or sold in the open market.