Which of the Following Measures Can Be Used to Evaluate

question 16

Multiple Choice

Which of the following measures can be used to evaluate a company's ability to meet future debt obligations after paying operating expenses and dividends and making capital expenditures?

• A) earnings per share
• B) net income
• C) cash flow adequacy ratio
• D) net increase or decrease in cash and cash equivalents

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Definitions:

Degree Of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to a change in its sales volume.

Variable Expenses

Expenses that change in proportion to the activity of a business, such as raw material costs or sales commissions.

Fixed Expenses

Expenses that remain constant regardless of production or sales volume, including rent, insurance, and salaries.

Sales Mix

The composition of different products or services sold by a company, affecting overall sales volume and profitability.