Entities with a Higher Proportion of Fixed Costs to Variable

question 50

Multiple Choice

Entities with a higher proportion of fixed costs to variable costs,within their cost structures,compared to entities with a lower proportion of fixed to variable costs,are regarded as:

• A)more risky
• B)less risky
• C)having a lower operating leverage
• D)not different in risk

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Definitions:

Simple Interest

Interest calculated only on the principal amount, or original sum borrowed or invested, without compounding.

Maturity Value

The total amount payable to an investor at the end of a fixed-term investment, including both principal and interest.

Term Deposit

A bank deposit that has a fixed term and typically earns higher interest than regular savings accounts.

Simple Interest Rate

The percentage of interest calculated only on the principal amount of a loan or investment, without compounding.