The Higher the Operating Leverage Factor, the

question 4

Multiple Choice

The higher the operating leverage factor, the

• A) greater the impact of volume on operating income.
• B) less the impact of volume on operating income.
• C) more likely operating income is to stay constant.
• D) greater the chance that none of the above occur.

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Definitions:

Partially Disclosed Principal

A principal whose identity is not known by a third party, although the third party is aware that the agent is making an agreement on behalf of a principal. Also called unidentified principal.

Apparent Authority

A form of authority that a third party perceives to exist based on the principal’s behavior, even if no actual authority has been granted by the principal to the agent.

Agency Relationship

A legal arrangement in which one party, the agent, is authorized to act for another, the principal, in business transactions.

Principal

In finance, the original sum of money borrowed or invested, excluding any interest or profit. In legal contracts, the party who authorizes an agent to act on their behalf.