When Considering the Decision to Shift a Firm's Cost Structure

question 172

True/False

When considering the decision to shift a firm's cost structure away from variable costs toward more fixed costs,a financial manager must weigh the increased financial risk associated with greater operating leverage against the expected increase in returns.

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Definitions:

Historical Data

Information from the past used for research, analysis, and planning by providing context or comparison for current conditions or forecasts.

Alternative Contingencies

Different or backup plans developed to address potential future events or circumstances that may impact objectives.

Uncertainty

The state of being unsure of something or the lack of predictability in potential outcomes.

Blue Ocean Strategy

A marketing theory that suggests companies are better off searching for ways to gain "uncontested market space" rather than competing with similar companies.