Which of the Following Firms Would Be Expected to Need

question 109

Multiple Choice

Which of the following firms would be expected to need the most cash to conduct its daily operations?

• A)a retail grocery store that sells on a cash only basis
• B)an electronics manufacturer that only assemble its goods once they have been paid for
• C)an airline that has many of its fares pre-paid by cash or credit card
• D)an aircraft manufacturer with large inventory and long development and sales cycles
• E)a clothing retailer that accepts both cash and credit payments

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or output over the short term, such as rent or salaries.

Variable Cost

Expenses that change in proportion to the amount of production or output levels.

Sensitivity Analysis

A technique used to determine how different values of an independent variable affect a particular dependent variable under a given set of assumptions.

Fixed Costs

Expenses that do not change with the amount of goods or services produced, such as rent, salaries, or insurance.