A Firm with Cyclical Earnings Is Characterized By

question 43

Multiple Choice

A firm with cyclical earnings is characterized by:

• A) revenue patterns that vary with the business cycle.
• B) high levels of debt in their capital structures.
• C) high fixed costs.
• D) high price per unit.
• E) low contribution margins.

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Definitions:

Return on Assets

A profitability ratio that indicates how efficiently a company is using its assets to generate profit.

Return on Equity

An indicator of a company's financial performance that shows the amount of profit generated per dollar of shareholders' investment.

Profitability Index

A financial metric that measures the relationship between the present value of future cash flows and the initial investment.

Conventional Cash Flows

Cash flow patterns characterized by an initial outlay or investment followed by a series of positive returns, commonly seen in traditional investments.