If a Company Has Very Low Operating Leverage (I

question 15

Multiple Choice

If a company has very low operating leverage (i.e. a low proportion of fixed costs the cost structure) and no changes are expected in operations

• A) percentage change income statement percentages can serve as the basis for projecting operating expenses.
• B) using common-size income statement percentages will overstate future projected operating expenses.
• C) using common-size income statement percentages will understate future projected operating expenses.
• D) using common-size income statement percentages can serve as a reasonable basis for projecting future operating expenses.

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Definitions:

University

An institution of higher education and research, which grants academic degrees in various disciplines.

Monopoly

A market structure characterized by a single seller, selling a unique product in the market without any close substitutes, holding significant market power.

Production Function

An equation, table, or graph that shows the maximum output that can be produced with a given set of inputs, based on the technology available.

Labor

Human endeavor, incorporating both the physical and the mental, aimed at producing goods and services.