If a Business Had a Capacity of $10,000,000 of Sales

question 33

Essay

If a business had a capacity of $10,000,000 of sales, actual sales of $6,000,000, break-even sales of $4,200,000, fixed costs of $1,800,000, and variable costs of 60% of sales, what is the margin of safety expressed as a percentage of sales?

Understand the impact of capital structure on a firm's risk and cost of capital.

Explain the concepts of business risk, financial risk, and their determinants.

Describe the Weighted Average Cost of Capital (WACC) and factors affecting it.

Identify and analyze the optimal capital structure and its implications on firm value.

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Definitions:

Employed

Employed refers to individuals who are working for pay or profit, engaging in a job or business, within a stipulated period.

Unemployed

Refers to individuals who are capable of working and willing to work but cannot find employment.

Misery Index

An economic indicator created by summing the unemployment rate and inflation rate, intending to measure economic discomfort within a country.

Financial Industry

A sector of the economy that includes businesses and institutions that provide financial services, such as banking, investment, and insurance.