Companies That Carry a High Level of Fixed Costs Relative

question 9

Multiple Choice

Companies that carry a high level of fixed costs relative to variable costs are considered to have

• A)A greater risk than companies with a high level of variable costs relative to fixed costs.
• B)A lesser risk than companies with a high level of variable costs relative to fixed costs.
• C)The same level of risk as companies with a high level of variable costs relative to fixed costs.
• D)Either a greater or lesser risk,depending on product costs relative to period costs.

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Definitions:

External Financing

Funding acquired from sources outside the company, such as loans, stock issues, or bonds.