________ Is the Potential Use of Fixed Operating Costs to Magnify

question 110

Multiple Choice

________ is the potential use of fixed operating costs to magnify the effects of changes in sales on earnings before interest and taxes.

• A) Financial leverage
• B) Operating leverage
• C) Operating budget
• D) Ratio analysis

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Definitions:

Target Return-on-sales Pricing

A pricing strategy where the price is set based on a target return on the sales revenue generated, aiming for a specific profit margin.

Variable Costs

Variable Costs are expenses that vary directly with the level of production or sales volume, such as materials and labor.

Fixed Cost

Expenses that do not change with the level of goods or services produced by a business, such as rent, salaries, or insurance.

Competition-oriented

Focused on outperforming rivals in a market by differentiating products, services, or business practices.