All Else Being Equal, a Reduction in Selling Price Will

question 98

Multiple Choice

All else being equal, a reduction in selling price will ________.

• A) increase contribution margin
• B) reduce fixed costs
• C) increase variable costs
• D) reduce operating income

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Definitions:

Treasury Bills

Short-term government securities issued at a discount from their face value, maturing in a year or less.

Low Default Risk

A classification for bonds or other forms of debt that are deemed to have a minimal chance of the issuer failing to make the required payments.

Money Market

The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities are traded, intended for short-term borrowing and lending.

Transaction Motive

The need to hold cash to satisfy normal disbursement and collection activities associated with a firm’s ongoing operations.