To Find a Firm's Operating Leverage Factor at a Given

question 221

Multiple Choice

To find a firm's operating leverage factor at a given level of sales, you

• A) divide the contribution margin by fixed expenses.
• B) divide variable expenses by fixed expenses.
• C) divide the contribution margin by operating income.
• D) relatively operating income by contribution margin.

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Definitions:

Nominal Interest Rate

The stated rate of interest without adjustment for inflation or other factors.

Real Interest Rate

The interest rate adjusted for inflation, reflecting the real cost of borrowing or the real yield on an investment.

Inflation Rate

The percentage increase in the general level of prices for goods and services in a country over a period, typically measured annually.

Industry Life Cycle

A sequence of stages from introduction, growth, and maturity to decline that industries typically go through, affecting companies’ strategies and performances.