With the Existence of Fixed Operating Costs, an Increase in Sales

question 168

Multiple Choice

With the existence of fixed operating costs, an increase in sales will result in ________ increase in EBIT.

• A) a proportional
• B) an equal
• C) a less than proportional
• D) a more than proportional

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Definitions:

Control

The power to influence or direct people's behavior or the course of events.

Warrants

Financial instruments allowing the holder to choose to purchase or sell an asset at a predetermined price prior to a specified deadline, without being required to do so.

Call Options

Financial derivatives that give the holder the right, but not the obligation, to buy an asset at a specified price within a specific time frame.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuing company's shares at certain times during their life, usually at the discretion of the bondholder.