When the Price Level Rises Unexpectedly, Some Businesses May Mistake

question 34

True/False

When the price level rises unexpectedly, some businesses may mistake part of the increase for an increase in the price of their product relative to others and so decrease their production.

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Definitions:

Debt/Equity Ratio

A fiscal ratio that reflects the comparative amount of equity from shareholders and borrowed funds utilized to support a company's resources.

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.

EBIT

Earnings Before Interest and Taxes, a measure of a firm's profit that includes all incomes and expenses except interest and income tax expenses.

EPS

Earnings Per Share (EPS) is a company's net profit divided by the number of common shares outstanding, indicating the company's profitability on a per-share basis.