Total Leverage Can Be Defined as the Potential Use of Fixed

question 205

True/False

Total leverage can be defined as the potential use of fixed costs, both operating and financial, to magnify the effect of changes in sales on a firm's earnings per share.

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Definitions:

Retail Inventory Method

An accounting method used to estimate the value of a store's merchandise by converting retail prices to cost prices.

Cost to Retail Ratio

A ratio used in inventory management that compares the cost of goods sold to the retail price of the goods.

Cost Flow

The manner in which costs move through a company’s accounts, typically following either a FIFO, LIFO, or weighted average approach in costing inventory.

Average Cost

A method to calculate the cost per unit by dividing total costs of goods available for sale by the total units available for sale, used in inventory valuation.