________ Is a Term Used to Describe the Magnification of Risk

question 163

Multiple Choice

________ is a term used to describe the magnification of risk and return introduced through the use of fixed cost financing such as preferred stock and long-term debt.

• A) Financial leverage
• B) Operating leverage
• C) Fixed-payment coverage
• D) The acid-test

---

Definitions:

Work In Process

Items in a manufacturing process that are not yet finished products, including raw materials, labor in progress, and overhead costs.

Work In Process Account

An account that tracks the costs associated with partially completed goods in manufacturing processes.

Process Cost System

An accounting method used to track the costs associated with processes that produce homogeneous products.

Process Cost System

An accounting methodology used to accumulate and assign costs to products or services that are indistinguishable from each other, typically used in manufacturing.