Which of the Following Statements About Highly Leveraged Companies Is

question 131

Multiple Choice

Which of the following statements about highly leveraged companies is true?

• A)Fixed costs are high and variable costs are low.
• B)Large changes in sales volume result in larger changes in net income.
• C)There is more risk with highly leveraged companies.
• D)All of these answers are correct.

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Definitions:

Price of Labor

The compensation paid to employees for their work or services, typically measured in terms of wages or salary.

Average Fixed Costs

The total fixed costs divided by the number of units produced, representing the fixed cost per unit of output.

Marginal Cost

The cost of producing one additional unit of a product or service.

Total Cost

The sum of all costs incurred by a business in producing goods or services, including both fixed and variable costs.