Companies with a Greater Proportion of Fixed Costs Have a Greater

question 152

True/False

Companies with a greater proportion of fixed costs have a greater risk of loss than companies with a greater proportion of variable costs.

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Definitions:

Free Cash Flow

Cash generated by a company after accounting for operating expenses and capital expenditures, available for investment or distribution.

Direct Method

An accounting method used to prepare the cash flow statement, which shows actual cash inflows and outflows from operating activities.

Operating Expenses

Expenditures that a business incurs through its normal business operations, such as rent, utilities, and salaries, excluding production costs.

Accounts Receivable

Receivables from clients for services or goods delivered by a company but not yet compensated.