What Measures the Sensitivity of Profit Changes to Changes in Sales

question 48

Multiple Choice

What measures the sensitivity of profit changes to changes in sales volume?

• A) profitability ratio
• B) variable cost ratio
• C) contribution margin ratio
• D) degree of operating leverage

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Definitions:

Passive Debt Investments

Investments in debt instruments, such as bonds, where the investor does not exert influence over the issuer.

Held-to-maturity

A classification for investment securities which the investor has the intent and ability to hold until a specified maturity date.

Extent of Influence

Refers to the degree to which an investor can sway management decisions and operational policies of an investee due to ownership level or other factors.

Common Stock

A type of securities that represents ownership in a corporation, granting holders voting rights and a share in the company’s profits via dividends.