Which of the Following Statements Is CORRECT?As a Firm Increases

question 12

Multiple Choice

Which of the following statements is CORRECT?As a firm increases the operating leverage used to produce a given quantity of output, this will

• A) normally lead to a decrease in its business risk.
• B) normally lead to a decrease in the standard deviation of its expected ebit.
• C) normally lead to a decrease in the variability of its expected eps.
• D) normally lead to a reduction in its fixed assets turnover ratio.
• E) normally lead to an increase in its fixed assets turnover ratio.

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Definitions:

Annual Fees

Regular charges imposed once a year for the use of a service or the participation in an investment or credit facility.

12b-1 Fee

A fee charged by mutual funds to cover distribution and marketing expenses, included in the fund's expense ratio and paid by its shareholders.

NAV

Net Asset Value, the total value of all the securities in an investment portfolio minus any liabilities, divided by the number of shares outstanding.

Asset Growth

The increase in the value of a company's assets over time, which can be due to investment returns or contributions.